London Second to Amsterdam for Hotel Investors

Date: November 2018

Location: Amsterdam v London

Who Said What: Deloitte’s 2018 European Hotel Investment Survey,

London has clawed back its second place, but Amsterdam continues to be seen as the most attractive hotel investment destination in Europe.

The Survey, which saw the Dutch capital retain its title for a third year running after more than a third of respondents (34%) ranked it top. London (24%) managed to fend off Paris (22%) and Madrid (19%).

London’s rise comes despite 70% of respondents saying that the UK is at a ‘peak’ or ‘downturn’ in its investment cycle.

Andreas Scriven, head of hospitality and leisure at Deloitte, said: “It is reassuring to see London climb back up the rankings, and somewhat curious considering the uncertainty around the manner in which the UK will exit the EU in less than five months’ time. For London to continue to remain attractive to hotel investors, it will need to address concerns around over-supply and high pricing. Investors will be keeping a close eye on currency markets in the coming months, as sterling’s weakness is likely to be a key driver of inbound investment into the UK capital.”

For the fifth year in a row, Edinburgh was named the most attractive UK regional city for hotel investments in the next 12 months, according to 39% of respondents. Second place saw Cambridge (30%) overtaking Manchester (28%). All three cities are also expected to see the highest growth in revpar (revenue per available room) in 2019.

The majority of hotel investors are optimistic about 2019 growth prospects in the regional UK hotel market, with 52% of respondents expecting revpar growth to be between 1%-3% across the UK, although this is down from 70% last year.

Hotel investors were less confident when asked about 2019 expectations for gross operating profit per available room (goppar), however. One in four respondents (25%) expect goppar to enter negative territory in London over the next 12 months, while 21% expect negative goppar in the regions.

Nikola Reid, director and head of UK hospitality at Deloitte, said: “The majority of hotel investors anticipate continued revpar growth in the regional UK in 2019. However, one only has to scratch away at this surface to reveal clear concerns and intensity in operational cost pressures caused by inflation, staffing challenges and Brexit uncertainties. With significant headwinds to profitability, UK hotel owners and operators will need to continue to be more innovative with efficiency and productivity to preserve the bottom line whilst having to adapt to ever changing consumer habits and value expectations.

“Despite this, we’ve seen no shortage of capital chasing the exceptional level of portfolio activity this year fuelled by a number of new players in town and ensuing aggressive pricing. With a number of portfolios and large single assets still expected to come to market next year, and, as we move closer to a resolution on the Brexit negotiations, the strength of the transaction market may be tested.”

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THPT Comment: Either way London, and the Rest of the major European capitals are still holding strong for hotel investment…Brexit…what Brexit?

First Seen: The Caterer