Last year was one of strong recovery for European hotel transactions with over €16 billion-worth of deals, twice that of 2020, according to our latest European Hotel Transactions report.

The report reveals that 322 European hotel transactions took place during 2021 involving 498 properties and 79,000 rooms. While total volume in 2021 doubled that of 2020, it fell nearly 40% short of 2019 levels on account of significantly fewer portfolio transactions. Sale prices per hotel room were generally higher, however, owing to rising demand from potential buyers of single assets.

The UK, accounting for 30% of total transaction volume, saw deals totalling €4.9 billion, up 146% on 2020 levels. More than half of these deals involved properties in London, making the UK capital the hottest market in Europe with €2.6 billion-worth of transaction activity. Barcelona at €770 million, Stockholm at €600 million and Berlin at €540 million also topped the transaction activity league, followed by Madrid (€465 million) and Paris (€414 million).

Chart 1: Single Asset Investment Volume 2005-21

Single-asset sales amounted to 65% of all transactions with more than half being in the UK and Spain, and reached a total volume just 15% shy of 2019 levels. The average sales price per room for single-asset sales reached their highest ever level recorded at €260,000, driven by COVID-aid related inflation and the sheer weight of capital waiting to be deployed.

‘Transaction activity has rebounded much quicker than expected, owing to cash-flush investors realising that a “wait-and-see” strategy may no longer be viable if they want to capitalise on the fast-recovering European hotel market,’ commented report co-author Shaffer Patrick, an associate with HVS Hodges Ward Elliott.

Portfolio deals accounted for 35% of European transactions during 2021, double the level of the previous year, but still more than 50% down on 2019, suggesting there is further recovery to come. The UK and Spain also dominated portfolio transactions, although sales prices per room tended to be flat compared with the previous year apart from those in Sweden, Portugal, Spain and Germany. In the UK, the average sales price per room for portfolio deals was significantly lower than in 2020.

Looking forward, the annual HVS Transaction report expects single-asset transaction activity to remain strong this year as investors hunt for opportunities now that pandemic restrictions have largely subsided.

‘A timely end to the war in the Ukraine, reductions in loan delinquency and changing lender sentiment would mean increased portfolio activity as we move into 2023/24,’ commented report co-author Matthias Hecht, an associate with HVS Hodges Ward Elliott.

‘Investors that have stayed out of the buying process looking for quick deals or discounts will be disappointed as distressed sales become scarcer. In addition, prices are likely to be driven upwards as top-line hotel revenues improve, aided by the business and conference markets returning in full force.’

A copy of the 2021 European Hotel Transactions report by Shaffer Patrick and Matthias Hecht can be downloaded here.