Why?

Speaking about the rationale behind the investment, Pandox’s chief commercial officer Jonas Törner, emphasized the strategic location and long-term potential of both the property and the market:

“Germany is the largest hotel market in Europe, and Cologne is a major hub in Nordrhein-Westfalen, an important economic region with around 18 million inhabitants. The market has strong long-term growth potential, and the hotel property is in a very attractive strategic location within the city.”

Cologne is already home to three Pandox-owned hotel properties—the Radisson Blu Cologne, Leonardo Hotel Köln Bonn Airport, and Leonardo Royal Hotel Köln - Am Stadtwald. The addition of the 275-room Pullman Cologne takes the company’s total portfolio in the city to nearly 1,000 rooms.

The city has continued to beyond its traditional business roots into a growing leisure destination. In 2023, the city welcomed over 3.8 million guests and recorded 6.6 million overnight stays, marking a 20.4 per cent increase in guests and a 17 per cent rise in overnight stays compared to 2022. 2024 saw a further rise with over 7 million guest nights, marking the highest growth among cities in North Rhine-Westphalia, with the surge partly attributed to major events such as the UEFA European Football Championship in June 2024.

And it’s this evolution and growth trend Pandox is seeking to take advantage of.

“The city is increasingly attracting more leisure visitors and this mix makes it interesting as a hotel market,” Törner says.

How?

The Swedish hotel owner and operator outlines a plan for the hotel which will see it positioned as a full-service property catering to both business and leisure visitors along with a strong meeting and events offering.

“The hotel product offers good opportunities for significant growth in net operating income and property value through renovation and repositioning,” says CEO Liia Nõu.

Pandox expects an initial return of 6.5 per cent on the Pullman Cologne Hotel based on its current earnings. However, after planned renovations and repositioning, the company anticipates a significantly higher yield. However, details around exactly how the company hope to achieve this remains under closely guarded lock and key.

Eye on the future

Taking a step back to look at the wider picture, despite the appeal of Germany’s hotel market, the country has lagged behind the Nordics and the UK in post-pandemic recovery. In 2023 and 2024, Germany’s transaction volumes hovered between €1.4 billion and €1.5 billion, significantly below the 10-year average of €3.2 billion.

While Törner acknowledges that full recovery to pre-pandemic levels is still a work in progress, he remains optimistic about Germany’s long-term hotel market fundamentals.

“We still have some way to go, but we see strong potential for growth and expect the market to gradually improve and return to pre-pandemic levels. Hopefully, increased public spending on infrastructure and security could be a positive trigger and drive demand for travel and hotels,” he says.

While the Pullman Cologne acquisition is a strong vote of confidence in the German market, Pandox has remained cautious in its investment approach.

“In the last couple of years liquidity in the German hotel transaction market has been somewhat muted. For this reason, we have focused our efforts on more active markets, such as the UK, where we have made several strategic acquisitions,” Törner says.

However, he stresses Germany remains on Pandox’s radar.

“We know the market well, and it remains Europe’s largest hotel market. We have a broad market coverage and it’s fair to say Germany is always on our radar.”

So with this acquisition, does Pandox see itself doubling down on Germany in the near future? The attitude seems positive - while the German transaction market remains relatively slow, Pandox’s long-term confidence in its growth is clear. Should investment conditions improve, more deals like Pullman Cologne could be on the horizon.

By Ifeoluwa Taiwo