The latest European Hotel Transaction Report was published, reflecting the 2008 single asset and portfolio hotel transactions and the huge reduction in deals compared to previous years is the most dramatic ever recorded by HVS.

After the boom years of 2005, 2006 and 2007 with transaction values of €16 billion, €20 billion and €19 billion respectively, for many the party never seemed to end. However, in autumn 2008, ‘Meltdown Monday' triggered the financial crisis that halted an already slowing transaction market in Europe, leaving people wondering if the party is now over.

Investor confidence suffered as debt financing remained scarce and expensive which, combined with either high yield requirements or the ‘wait and see' approach of investors, led to a huge drop in transaction activity in 2008, commented co-author Saurabh Chawla, Associate Director at HVS London.

"In 2008, transaction volume has plummeted to a mere €6 billion, which represents a two-thirds drop in investment activity. Just over €3 billion worth of portfolio transactions were recorded in 2008, down three-quarters on the previous year," he added.

The changing nature of hotel buyers in 2008 was characterised by co-author Elke Geieregger, a senior associate at HVS.

"In contrast to 2007, when we saw an increase in large-scale investment made by private equity funds, as hotel operators moved away from asset ownership, 2008 has seen the return of small and budget hotel operators as buyers, as well as an increase in activity from institutional investors and real estate investors', she noted.

Charles Human, managing director of HVS Hodges Ward Elliott, added that, towards the end of 2009 and into 2010, HVS expects to see an upturn in activity as operating markets stabilise, increased liquidity returns and prices reduce either as a consequence of owners needing to sell or banks foreclosing.

"We expect activity, when it does return, to be strongest in the core European markets, such as the UK, France and Germany. There will be a flight to quality and generally less appetite for emerging markets, where risk premiums have become inadequate relative to higher yields which are now becoming available in Europe's established markets," he concluded. ENDS

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