INVESTORS POUR MORE MONEY INTO THE BOOMING CEE HOTEL INDUSTRY 2017
Information by Cushman & Wakefield. Published Date : 06/03/201
Prague, March 6, 2017 - The investment volume achieved in 2016 totalled almost EUR 1.2 billion with 46 transactions recorded in core CEE hotel investment markets*. In comparison, 2015 reached just over EUR 700 million with 45 transactions. Austria was the star performer with almost EUR 800 million transacted, which made up 67% of the total investment volume. In other CEE markets volume was lower than in 2015 with a particular decline in Poland where it more than halved in volume. The Czech Republic accounted for 18% of total CEE investment share; most of the investment took place in Prague which saw 7 transactions including the Hilton Old Town, Park Hotel and Chopin Hotel.
The CEE hotel industry reported growth across all key performance metrics. Increasing number of tourists have chosen CEE destinations, thus occupancy rates returned or even surpassed the pre-crisis levels, reaching 72% on average up from 69%. As the cost of visiting CEE has gone up along with the increasing hotel room rates, profits have been soaring. The average price per room reached EUR 76.6 up from EUR 73.6 in 2015. While the Eastern markets achieved double digit growth in terms of revenue per available room, the more mature markets of Central Europe including Prague and Warsaw saw growth of around 6%.
Money has been flowing in from Far East Asia, the Middle East, America as well as Europe. Hence the region has become truly international.
"In the last few years the region has seen important inflows of capital as wider groups of investors try to take advantage of the strong performance of the local hotel industry. Among the key factors driving performance are the continued strength of inbound international tourism into the CEE region, supported by Asian travellers as well as the re-focus of North African and Western European tourism. Moreover the willingness of banks to finance hotel acquisitions has significantly enticed high investor demand," says David Nath, Head of CEE Hospitality Team at Cushman & Wakefield.
Banks' appetite for lending is reflected in the return in hotel development activity with 2017 expected to deliver an additional 4,000 rooms across Central and Eastern European capital cities. The markets with the greatest development prospects are Warsaw and Budapest. Prague is an exception with a limited pipeline due to planning constraints and only a few sites suitable for hotel development.
"Although we expect growth to slow down slightly, during 2017, the investment market will remain robust compared to other more established markets in Western Europe. We will also see increasing capital invested in less mature hotel investment markets such as Bucharest and Sofia" says Frederic Le Fichoux, Head of Hotel Transactions - Continental Europe and adds "Average daily rate is expected to rise further, generating higher income returns for investors especially in more mature CEE markets, where the development pipeline is limited."
In 2017, investors' activity will be notable especially in Hungarian, Austrian and Romanian hotel investment markets, where significant assets are set to be put up for sale or about to be transacted.
CEE refers to the Czech Republic, Poland, Austria, Hungary, Slovakia, Bulgaria and Romania.
INVESTMENT FLOWS INTO CZECH HOSPITALITY SET TO INCREASE IN 2015
Information by Cushman & Wakefield. Published Date : 26/03/2015
EnlargeInvestments exceeding EUR 220 million are expected to flow into hospitality properties in the Czech Republic this year, according to global property adviser Cushman & Wakefield. Both domestic and international investors are interested in the hotel market, and Asian investors in particular are examining the Czech hospitality market more intensively than before. This growth applies across the entire Central European region, continuing the upward trend started in 2013.
"Since the beginning of 2015 we have facilitated the sale of six hotels in Central Europe. More deals are in the pipeline for the upcoming months. We have just launched the sale of the Union Hotels portfolio in Ljubljana, Slovenia. All types of capital are interested in buying - from private to corporate to institutional," says Frédéric Le Fichoux, Head of Cushman & Wakefield's CEE Hospitality Team.
"We are seeing interest from new capital to invest in the region. Many of these interest parties are Asian and Middle Eastern investors, and among them, Chinese investors. There are two reasons for this: China has lifted the restrictions on property acquisitions abroad and the demand of Asian tourists for Central Europe is growing," Mr Le Fichoux adds.
The driver behind the increasing investments in Czech hotels is primarily the improving performance. Both occupancy and average room rates are growing, in effect improving hotel profitability. The decrease in the number of Russian clients has been compensated by tourists from Germany and, more importantly, China and South Korea.
The first two hotels to transact in 2015, in the Czech Republic - Courtyard by Marriott Prague Airport and Courtyard by Marriott Plzen - changed owners in February. Cushman & Wakefield's Hospitality Team advised the vendor CA IMMO on both transactions. More transactions are expected - at this point, we know that negotiations are underway regarding the sale of three hotels in the Czech Republic. The sale of the Hilton in Prague is likely to be the biggest deal for this year.