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Demand for hotel acquisitions across Europe prompts early exit by investors, says HVS

Strong demand for hotel acquisitions prompting private equity investors to sell their assets ahead of the usual investment time-frame, continued consolidation amongst the branded hotel chains, and the impact of recent terrorist activities are the key issues facing the European hotel sector into 2016, according to global hotel consultancy HVS.

Looking ahead, HVS London chairman Russell Kett expects demand for hotel acquisitions in Europe to continue as investors, particularly those in the US and Asia, continue to diversify their investments globally.

“Some have already shown their desire to sell the hotels they have only recently acquired – well before the usual five to seven-year time normally sought. The trend towards early checkout will continue as long as there is a queue of investors still seeking to acquire hotels and portfolios. The recent sale of Malmaison and Hotel du Vin by KSL Capital Partners to Singapore-based Frasers Hospitality after only two years is a good example,” he said.

“This activity fuels further interest in the sector, providing opportunities for other buyers to enter the market. It is also an indication that owners are starting to feel we are approaching the peak of the property cycle, although this could remain the case for some time, conceivably through 2016 and even 2017.”

Property in London, Paris, Rome and Amsterdam is expected to be most in demand, but increasingly hotel investors will start to look at secondary and tertiary cities in order to diversify their investments.

HVS expects to see consolidation in the hotel sector continue, while acquisitions and the restructuring which will inevitably follow, will act as a catalyst to other groups as they seek to benefit from the economies of scale such transactions generate.

“When major companies coalesce there are implications on some of their brands – the weaker performers being subsumed into their stronger counterparts being the most obvious consequence as well as savings on duplicated overheads,” added Russell Kett.

Another key impact on Europe’s hotel sector will be the terrorist atrocities seen in Tunisia, Egypt, Paris and elsewhere, which will affect potential travellers, especially leisure visitors, for some time to come.

“The propensity to travel should recover quickly, but not before resort locations in Spain, Italy, Greece, the Adriatic, Cyprus and Malta continue to benefit from displaced demand from North Africa and Egypt.

“Migrants and refugees fleeing from Syria and other areas of conflict will continue to put pressure on Turkey, Greece and neighbouring countries, a situation that is unlikely to be alleviated in 2016,” Kett added.

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