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Hotel
Last year, there were around €4b of hotel deals in Germany. ‘The only issue this year is the lack of supply but I expect to see a similar deal volume this year,’ Kaiser said.
Tourism in Europe is expected to grow by 3.5% to 4.5 % this year, in a move that will add zing to European hotel markets, according to Matthias Hautli, manager at Engel & Völkers Hotel Consulting.‘Growth is mainly based on the global and European economic upswing and robust outbound demand from main source markets,’ Hautli told REFIRE. ‘In addition, several destinations such as Northern Africa and Turkey have lost attractiveness against Southern Europe due to political and security turbulences. We also see that more Germans are choosing to holiday at home, rather than flying to 'all inclusive' locations.’Germany's Top 5 markets - including Berlin, Munich and Hamburg- all benefit from both business and leisure tourism and new attractions are proving to be a draw, Hautli said. ‘Hamburg's new concert hall, the Elbphilharmonie, is attracting international tourists. At the moment, international tourists only account for 25% % of business in Hamburg, so there's tremendous potential for growth.’
Munich is one of the most attractive hotel markets in Germany because it's the most expensive with an average room rate of €125 and also benefits from strong occupancy rates. ‘There were almost €1b of hotels transacted in Munich last year and I would it expect it to be strong again this year,’ Hautli said.
According to Engel & Völkers Hotel market report published this month, Hamburg and Düsseldorf are hot on Munich’s heels, with room prices averaging €117 and €113 a night, respectively. Overnight stays in Munich also rose by 10.9% in Munich last year, although occupancy was down 1% to 75%, due in part to the sizeable hotel pipeline, according to Engel & Völkers. The Bavarian capital has the most extensive hotel pipeline of Germany’s ‘Big 5’ at 13,000 beds, which will exacerbate competition in the city.
Berlin is still the frontrunner in Germany in terms of overnight stays, at 28.9 million hotel visitors in the first 11 months of last year, up 0.7% on the previous year, despite Air Berlin’s insolvency, which had a negative impact on tourism figures, according to Engel & Völkers. If the city is to keep pace with the anticipated 13,000 new beds by 2020, overnight stays will need to increase by 4%.
Over in Hamburg, overnight stays rose by 4.1% to 12.8 million in the first 11 months of last year, driven partly by the opening of the Elbphilharmonie and heightened international awareness due to the G20 summit. However, to maintain this occupancy level until 2019, overnight stays will have to increase to around 15.5 million, or by 5.6% by 2020. Average room rates in Hamburg also rose by 5.3%, marking the strongest increase in any of the Big 5. The city also has the highest room occupancy among the top five at 81%.
And as the market heats up, yields are continuing to compress, Hautli said. ‘Prime yields stood at 4.25% in the Big 5 at the end of last year but I expect them to tighten by 25 bps this year,’ he said. ‘Germany's hotel market is definitely influenced by the lack of available product, so investors are also looking closely at secondary cities, of which Germany has many.'
Interestingly, the revenue per available room (RevPAR), the most important key performance indicator for hotels, shows that the highest growth rates are in Eastern Europe, according to Engel & Völkers. Average RevPAR in the region has risen by 10.8%, which is significantly higher than Europe as a whole, at 5.6%.
‘In 2009, there was a huge drop in tourism there, in the wake of the financial crisis, but for the last three-to-four years the market has really bounced back, particularly in Poland,’ Hautli said. ‘German investors are looking very seriously at Poland's hotel market because it is performing so well. Czech Republic and Hungary have also regained attractiveness although they cannot be compared with Poland to date.’