Strong year-end results in the German hotel market
Transaction volumes significantly exceed previous year’s results
January 16, 2013, Munich – Following a very strong sales volume in Q3, the German hotel investment market experienced an even more profitable Q4 in 2012 with a transaction volume of almost €1.3 billion at the end of the year. That put results at around 16% above the previous year. “Last year started out slow and then picked up speed. While investors noticeably held back during the first half of the year, some attractive, large-volume deals were finalized in the second half. Those deals ultimately led to investment volumes being slightly higher than expected,” says Andreas Trumpp, Head of Research at Colliers International, Germany. Small-volume deals of less than €5 million made up approx. 4%, or €54 million, of the total transaction volume. The hotel portfolio’s share reached a level similar to that of the previous year. At around €184 million, some 14% of the transaction volume was generated within the scope of package sales.
Strongest demand for three and four-star hotels – top locations spark investor interest
The majority of capital was invested in the three to four-star segment in 2012 as well. At the end of the year, hotels with three or four stars made up around 72%, i.e., almost €926 million, of the transaction volume. Low-budget and economy hotels with one or two stars accounted for some €184 million in investment capital (a 14% market share), and luxury hotels with five stars brought in around €130 million (10%). Due to several large-volume sales of stock real estate, that segment’s share of the transaction volume was slightly above that of the previous year at around 63%, or €814 million. New buildings, hotels currently under construction and project development were recorded at 37%, or €468 million. “Demand in 2012 was even more focused on the top locations - Berlin, Düsseldorf, Frankfurt/Main, Hamburg, Cologne, Munich and Stuttgart - than it was in 2011. Almost 77 percent of the transaction volume was generated in the top 7 locations. Their share was only 60 percent in 2011,” says Andreas Trumpp. The largest sales transactions in 2012 included the Maritim Hotel in Berlin, which SEB sold to Al Rayyan Tourism Investment Company, a Qatar-based investor, for around €180 million, and the Barceló Hotel in Hamburg, which Union Investment bought from the Spanish Barceló Group for around €41.5 million.
Conservative investors look to German hotels
The majority of investors who purchased German hotels in 2012 can generally be classified as conservative. Asset and fund managers formed the largest buyer group with a transaction volume share of 31% followed by private investors and family offices with approx. 18% and open-ended real estate funds and special funds with around 17%. The share of international investors was once again somewhat higher compared with the previous year. Altogether they invested almost €913 million in German hotel real estate, reflecting a market share of 71%. Excluding portfolio sales, this put the average purchase price per hotel at around €32 million, while German investors only spent around €10 million per hotel.
Outlook: Positive prospects for transaction development in hotel market confirmed
The positive forecast made by Colliers Hotel at the start of 2012 has proven accurate. The total transaction volume of around €1.3 billion significantly exceeded the anticipated result of €1 billion. Andreas Erben, Managing Director of Colliers Hotel GmbH, is also optimistic about the coming year. “We expect to see strong growth in the German hotel market in 2013 and anticipate a transaction volume of over €1 billion,” he explains. “Our prognosis is primarily based on the fact that both domestic and foreign investors have shown increased interest in the German hotel market. A growing number of these investors see the attractive potential ROI in the hotel asset category as a viable addition to their real estate portfolios,” he continues. “Institutional investors in particular will be investing more heavily in the hotel market, which will boost the transaction volume and act as a positive indicator on the hotel market.”