The interest in hotel investments, which has been increasing for some time, is now also reflected in the transaction volume. With total revenue of almost €1.43 billion, hotels increased their volume by almost 44% compared to the same period last year and achieved their best result since 2021. At the same time, the 12-month volume from the previous two years was already exceeded at the end of September. The market momentum that picked up over the course of the year is particularly positive, as evidenced by two very strong quarters with investment volumes of almost €600 million each after the rather weak start to the year due to the lack of product surplus from 2024. This is the result of the analysis by BNP Paribas Real Estate.
"At just under €380 million, the result of the revitalised portfolio segment is also encouraging. The last time there was an even higher volume was in 2020. At the same time, the volume of individual transactions exceeded the €1 billion mark for the first time since 2022," explains Alexander Trobitz, Managing Director and Head of Hotel Services at BNP Paribas Real Estate GmbH. The fact that the result is not only based on individual large transactions is also shown by the distribution by size class. In all categories from € 10 million, significantly more sales were registered than in previous years. Since larger transactions – which include not only portfolios but also larger individual transactions such as the Mandarin Oriental in Munich or the Steigenberger at the Chancellery in Berlin – are also increasingly being recorded, the average volume per transaction of around €25 million is approaching the values before the interest rate turnaround. At the same time, investment activities by foreign investors have also picked up. At the end of the third quarter, their contribution was around 59%.
More sales at almost all A locations
A hotel transaction volume of around €800 million was registered at the seven A locations, an increase of 54% compared to Q1-3 2024. With the exception of Stuttgart, where the volume remained below €20 million (-76%), more investment was made in all cities. With the help of the sales of the Mandarin Oriental and the Steigenberger at the Chancellery, Munich (€275 million; +156%) and Berlin (€262 million; +3%) lead the field by a large margin. At the same time, these are also the locations with by far the most number of overnight stays and the largest number of hotels – a factor that is indispensable for an appropriate range of investment products. At over €140 million, Cologne achieved almost a tenfold increase on the previous year's figure and benefited not only from the sale of the Pullman for almost €70 million, but also from larger investments in serviced apartments. In addition, there was a significant amount of investment in hotels in Hamburg with just under €64 million (+37%) and in Düsseldorf with €31 million (+121%).
Prospects
The hotel investment market has been increasingly dynamic in recent months. While the positive sentiment among market participants was not yet reflected in the figures at the beginning of the year, the market recovery is now quite clear. Accommodation figures remain at a high level and show a high level of resilience to the general economic situation in many locations. For example, the number of overnight stays in Hamburg or Munich in the middle of the year is higher than in the first half of 2024. In addition, there are the good performance indicators with high ADRs and RevPARs. There are many indications that fundamental data will continue to develop positively, making hotels an attractive investment option compared to other asset classes that potentially face stronger headwinds on the user side.
The past few months have shown how strongly the supply side and investment opportunities shape market activity and, in some cases, also dampen it. At present, however, there is much to suggest a lively final quarter, as several, including larger transactions, are currently being marketed or are about to be signed. In addition, the price expectations of sellers and buyers have increasingly converged in recent months, so that significantly more transactions are now being successfully completed than before.
"Certainly, the hotel investment market, like all other asset classes, is also under the influence of geopolitical developments. However, if no further trouble spots escalate, the hotel investment market should continue its upward trend in the coming months. It is very likely that this asset class is now at the beginning of a new cycle. There are good entry opportunities for investors to take advantage of the expected yield compression," says Alexander Trobitz.
Link to the market report: https://www.realestate.bnpparibas.de/marktberichte/hotel-investmentmarkt/deutschland-at-a-glance
