Barcelona and Madrid have reached
the top 5 of Colliers International’s inaugural Hotel Investment
Attractiveness Index, an analysis of the investment climate of 20 European
Paris’ lead ranking is due to its high demand growth, strong hotel
performance, high investment returns and market depth from 2012-2016.
Bakker, Head of EMEA Hotels, Colliers International said: “Investors are
regularly requiring the latest information on cities where they will receive
high returns, which in a politically and economically uncertain world, is often
difficult to predict. Our index provides us with something more than anecdotal
evidence through which to advise our clients.
to our latest data, Paris scored highly in terms of valuation exit yields and
hotel investment volume between 2007 and 2016.
saw over 15 million international tourists visit the city in 2015 and witnessed
average hotel occupancy levels of over 77 per cent from 2012-2016.”
The Colliers index
uses twelve metric components, weighted to give each of the 20 locations a
score of up to 400, including population; GDP per capital; total workforce;
commuting workforce; tourist arrivals; room occupancy; Average Daily Rate
(ADR); Revenue per Available Room (RevPAR); Land site prices; Building costs;
Valuation exit yields and investment volumes. These scores were then
consolidated into a single figure and ranked to show which markets are hot in terms of overall demand, their recent operating
performance and how this ties into the attractiveness of each market with
regards to the acquisition of existing hotels and for the development of new
Here are some of the highlights:
London and Barcelona came out as the second and third most interesting cities to invest in, closely followed by Amsterdam and Madrid. The story for the top two cities, London and Paris, is very similar, but Paris pips London to the top by virtue of having slightly lower development costs.
- Low development costs is one of the areas in which Barcelona and Madrid excel, increasing the overall attractiveness of the cities ahead of Amsterdam and Berlin sitting in fourth and sixth places.
- At the other end of the scale, although the development cost component scores very highly for Bucharest, this is not enough to compensate for low demand appetite and the lack of a hotel investment market, so it has been ranked the lowest.
- Istanbul has been ranked relatively low at number 17, despite the size of the market, helping drive a good overall demand score and low development costs. However, the operational performance lags behind due to low occupancy rates, leading to lower returns on investment. The current political and economic climate is not particularly conducive to a robust investment market.
- Zürich is the most interesting city to watch out for in the future, as its operational performance has been excellent in the last few years, suggesting an under-supply of quality hotel stock. Hotel investment interest is high, and if demand for the city continues to increase, it may become one of the most popular cities for new development and investment, despite the high development costs.
- Manchester and Dublin also perform highly, where hotel performance exceeds demand. The case for an increase in business demand growth in both cities looks very strong in the coming years, which should increase their attractiveness to developers and investors alike.
Montse Conde, Director
of Research and Consultancy at Colliers International Spain adds: “With the Hotel
Investment Attractiveness Index, we were able to create a unique analysis of a
very dynamic market. By combining the twelve variables, we can generate far
more of an insight into the current hotel industry and even predict what could lie