Upward trend discernible: hotel investment revenue up 5% year-on-year

BNP Paribas Real Estate publishes market figures for Q4 2024

For 2024, an investment volume of around €1.4 billion was registered for the German hotel investment market. Although the long-term average was missed by 56% (Ø10 years: approx. €3.2 billion), market momentum picked up over the course of the year, resulting in an increase of 5% compared to the previous year’s result. This is the result of the analysis by BNP Paribas Real Estate.

“The market recovery picked up significantly in the second half of the year; almost two-thirds of annual sales were booked in this period. Proof that the trough seems to have been passed is the significantly broader market dynamics. With more than
85 registered deals, the number of transactions increased by around 43% compared to the previous year,” explains Alexander Trobitz, Managing Director and Head of Hotel Services at BNP Paribas Real Estate GmbH.

Although the investment volume is still noticeably below pre-pandemic levels, the market environment in the hotel sector has changed fundamentally since 2020. Compared to the average investment volume of the years 2022 to 2024 (around €1.9 billion), the current result deviates only about a quarter from this average value.

Corporates made a significant contribution to this with 27%. (€380 million) as well as the equity-rich family offices and private buyers, who together account for around a quarter (around €350 million) of the hotel investment volume. Hotel groups that acquire properties as operators are currently more active than in previous years. For example, Roomers Munich and Méridien Stuttgart are two major transactions between €50 million and €100 million.

Berlin scores with major transaction and is No.1

With a turnover of a good € 380 million, Berlin contributes a significantly above-average market share of 27% to the hotel investment volume. A significant part of this was due to the completion of the large-volume sale of the Hotel de Rome.

While in 2023 almost half of the hotel investment volume was still attributable to the large-volume segment above €100 million, in 2024 only one deal of this magnitude was registered with the aforementioned Hotel de Rome. Portfolio transactions are also rare in the current market environment and only have a market share of 11%. In contrast, investment turnover for transactions of up to € 10 million is above the long-term average at a total of € 200 million. The lowest average volume per deal ever registered at
€16 million is also indicative of a small-scale market.

Prospects

Although the transaction dynamics on the German hotel investment market are still well below average and are only rising slowly, the upward trend can be seen in the latest market figures. In the second half of the year in particular, a market recovery and improved sentiment on the investor side were registered. The reasons for this are challenging conditions, especially on the financing side, as well as an overall weak and uncertain macroeconomic environment.

“However, the fundamentals speak more than ever for investments in the German hotel investment market, as the number of overnight stays is largely well above pre-Corona levels and occupancy rates are also increasing. This was due not only to the return of business travellers, but in particular to the increase in private travel. Against the backdrop of the consistently high willingness to travel in Germany, the slowly brightening consumer climate and the expected strong wage settlements, the accommodation market is likely to continue to gain momentum,” says Alexander Trobitz.

An important aspect in the current market environment is the further development of supply, especially in the new-build segment. Here, the slump in new construction activity of the recent past will continue to have an effect and contribute to the shortage of supply.

The latest statements by the European monetary authorities suggest that the current cycle of interest rate cuts will move decisively towards the neutral interest rate level of 2%. In a challenging financing environment, the enlightening horizon is becoming increasingly visible. In combination with the user market, which continues to gain strength, the market recovery is likely to continue to pick up speed in 2025 and a higher hotel investment volume will be recorded at the end of the year than in the two previous years.