Hotel studies forecast further steady German hotel growth

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We reported in the last issue of REFIRE on the German hotel market, in particular how in the budget sector Germany is rapidly playing catch-up with other European markets as a host of new players enter the market. The latest issue of the Investment Barometer from trade publication hospitalityInside in conjunction with German fund manager Union Investment addresses the issue of hotel investors’ expectations, and warns that implementation invariably takes longer than anticipated.

The 3rd edition of the jointly-produced Investment Barometer concludes that brand hotels are quick to announce rapid expansion, but in reality, they rarely implement these plans as quickly. The main reasons, according to 40% of respondents to the survey, are lack of availability of properties, inadequate financing, and a frequent mismatch between investors’ and operators expectations.

According to Union Investment Real Estate’s hotel investment director Andreas Loecher, “The answers demonstrate the immense need for communication between operators and investors and once again underline the peculiarities of the hotel special segment.” Union Investment is itself a major owner of budget hotels and hospitality services.

Nonetheless, market sentiment among investors and hotel developers remains highly optimistic, with the autumn barometer survey index climbing by 1.54% due to good prospects for developments and overall positive conditions for growth among brand hotels. Especially good expansion prospects are predicted for budget hotels (44%), followed by serviced apartments (25%).

The latest study from hotel advisory group Hotour offers an optimistic view of the sector in Germany, and attempts to defuse fears that the market is becoming saturated, with over-exaggerated growth prospects. The consultancy’s CEO, Martina Fidlschuster, concedes that in certain segments of the Big 7 German cities there will be losers among the new entrants, but in all the biggest cities the number of guest overnight stays grew last year at a much faster rate than the number of new beds coming on stream.

2014 has seen a record number of bed nights in Germany, and 2015 is shaping up to be even bigger. At 420m guest nights in 2014, this is 22% more than in 2000, with cities like Berlin up 150% while the number of beds has grown 126%. Comparable figures for Hamburg are 145% with 104% increase in available beds, for Düsseldorf 90% with 68% more beds, Frankfurt 87% with 68% more beds, Dresden 86% with 51% more beds, and Munich 72% with 52% more beds. Cologne, at 86% with 81% more beds, is the only city where the supply of new beds and the demand for overnights are more or less balanced.

Perspective of 2% growth in 2015 are justified, says Ms. Fidlschuster, given a number of new developments planned for 2015. Among these are the opening of the new second terminal at Munich Airport, boosting the capacity of the airport from 11m passengers annually to 36m. The new Cruise Centre CC3 in Hamburg harbour will permit the docking of the latest generation of giant cruise ships and boost the overall passenger numbers using the port. Plus there are several major new cultural events and the Champions League football final in Berlin’s Olympic Stadium.

Meanwhile, in new hotel transactions, France’s Foncière des Régions (FDR) has entered into a joint venture with insurers ACM Vie and BNP Paribas Cardif to buy hotel properties. The company said that the majority shareholder in the new venture, FDM Management, is FDR subsidiary Foncière des Murs. The plan is to acquire hotels run by the sector's major operators. Currently, an effort with other institutional investors to raise equity capital is in progress, and will reportedly enable an investment capacity of €300mn.

Exclusive negotiations for the first two purchases totaling €104mn are underway. They are nine hotels in Germany for €49mn and a hotel project near the airport in Paris for €55mn. The properties in Germany are to be operated in the Louvre Hotels Group as budget hotels under the Première Classe brand.

Separately, fund manager Deka Immobilien has acquired two hotels in central Nuremberg from GBI for about €19mn. The hotel ensemble on Bahnhofstrasse comprises a newly opened Hampton by Hilton and a Holiday Inn Express with a total of 204 rooms, both operated by Foremost Hospitality. They will be held by West Target Select Hotel addressed exclusively to institutional investors. The two houses had been handed over to Foremost in mid-November.