BNP Paribas Real Estate publishes figures on the hotel investment market for Q3 2024
After the first nine months of 2024, an investment volume of just under one billion euros (€992 million) was registered in the German hotel investment market. Although the long-term average was missed by 51% (Ø 10 years: approx. € 2 billion), the comparatively weak previous year's result was significantly exceeded with an increase of 73%. This is the result of the analysis by BNP Paribas Real Estate.
The German hotel investment market can be attested to a progressive market revival in the course of the year. The investment volume in the third quarter was quite strong at around €450 million. "The growing market momentum is underlined by a significant increase in registered deals. After the first nine months, more than 60 transactions were already recorded, around 20 more than in the previous year. Nevertheless, the hotel investment volume continues to be noticeably below historical highs," explains Alexander Trobitz, Managing Director and Head of Hotel Services at BNP Paribas Real Estate GmbH. The main reasons for this are the increased cost of capital, the lower purchase price level and the declining completion figures in the new hotel construction segment.
To date, foreign investors have contributed around €525 million, an above-average market share of 53% (Ø 10 years: 41%) of the total investment volume. Portfolio transactions, the acquisition of the Hotel de Rome and a number of smaller transactions contributed to this. On the investor side, family offices and private investors are currently much more present with a market share of 26%.
Market continues to be structured on a small-scale basis
So far this year, none of the seven top locations has been able to achieve their respective long-term average in hotel investment volume. Berlin performs comparatively well with a market share of around 26%. The sale of the Hotel de Rome made a significant contribution to this. After all, a higher hotel investment volume was recorded at all A locations than in the same period last year. The growth is particularly noticeable in Munich and Stuttgart.
Compared to the previous year, the hotel investment volume is more evenly distributed across the size classes. At € 345 million, the segment of medium-sized transactions between € 50 million and € 100 million is the largest in volume. Symptomatic of a more fragmented market is the above-average investment volume of around € 150 million (Ø 10 years: € 130 million) in the segment up to € 10 million and the low average volume per transaction of € 16 million.
Prospects
"The investment volume on the German hotel investment market increased significantly compared to the same period last year. In the second and especially in the third quarter, there are signs of a significant market recovery. Nevertheless, the volume remains well below the long-term average, especially due to the increased cost of debt and macroeconomic uncertainties," says Alexander Trobitz.
Since the end of the Covid pandemic, both private and business travel has increased significantly again. The number of overnight stays in all top locations (except Berlin) is currently well above pre-pandemic levels. The European Football Championship in their own country and the return to consumer and travel underpin the solid framework conditions of the German hotel user market, which should provide additional security from an investor's perspective. An emerging brightening of the economic situation together with broadly higher wage agreements are likely to further drive private and business travel in the coming quarters.
While more and more products are coming onto the market in the existing segment, the supply in the new hotel construction segment is likely to contribute significantly to the supply shortage for the time being due to the overall slump in new construction activity.
In anticipation of a continuation of the expansionary course of the ECB's monetary policy and the associated brightening of the interest rate and financing environment as well as a user market that is gradually gaining stability, investment turnover is likely to continue to increase in the coming months from today's perspective. From today's perspective, the previous year's result (€1.3 billion) and the year-end result for 2022 (€1.9 billion) should therefore represent a realistically achievable target corridor for the investment volume at the end of the year.
