William Duffey, head of EMEA hotels & hospitality capital markets for JLL, says: “There is clear evidence that investors no longer see hotels as an alternative asset class, but a core asset class. As the shift away from offices continues, hospitality is another way for investors to cement their increasing interest in beds.”

Analysing the year’s highs, Jon Hubbard, head of hospitality, EMEA at Cushman & Wakefield, says: “The trading performance of European hotels experienced a ‘Taylor Swift bounce’ in the first half of this year, with high customer demand partly linked to the major events that took place across the continent, such as Euro 2024, the Olympic Games, and Swift’s Eras tour.”

Swift in particular worked some RevPAR magic, with a JLL report noting that RevPAR in destinations that hosted Eras Tour concerts outperformed the global average by 490 basis points. Compared to 2019 figures, the top five markets that saw the largest percent increases globally during Swift’s tour included four European hotspots, namely Edinburgh, Paris, Madrid and Milan.

Although Europe’s sporting spectacles didn’t produce quite the uplift hoteliers had hoped for in Paris and Germany respectively, investors continued to pile into key European cities. The UK, Spain, and France were the most active transactions markets in the first half of the year, accounting for over two-thirds of the European total, according to Cushman & Wakefield. While H1 volumes reached over €11.6 billion, the highest six-month volume since 2019, most market watchers predict that the sector will register as much as €20 billion in deals by year end.

North versus south

The year 2023 closed with transactional evidence of an investor preference for southern Europe over northern European markets, underpinned by the strong leisure performance and year-round appeal of Spain, Portugal, Italy and Greece. While large single asset deals in 2024 have continued to highlight these markets, a number of key portfolio trades in northern Europe suggest that investor appetites are starting to balance out.

For example, Gruppo Statuto’s €200 million deal for the Six Senses Hotel Ibiza – an island record – underlined the appeal of sun and sea, as did trades such as Mohari and Omnam’s €300 million deal for the five-star Bauer in Venice, or Castello underwriting the Nobu Hotel Via Veneto in Rome. Banco Santander acquired a stake in three Meliá hotels for €300 million, while Blackstone bought the Grand Hyatt Athens for €230 million.

Yet the UK in particular has seen several portfolio deals that demonstrate international investor faith in the country’s long-term fundamentals. Starwood Capital inked a £800 million deal with the family-run Radisson Edwardian group for 10 hotels with 2,053 rooms across the country, as well as signing a pledge to team up on further deals. The transaction took Starwood’s European hotel tally to 47, including some 10,000 rooms across the continent. JLL represented the seller.

Portfolio trades

Underlining the big-ticket trend, Ares Real Estate snapped up a portfolio of 18 UK hotels with 3,028 rooms from Landsec for £400 million. The portfolio includes midscale and economy properties with the majority of value in Central London and the remaining assets primarily located in major cities including Edinburgh, Manchester and Birmingham. Meanwhile, Nordic hotel owner-operator Pandox doubled its UK hotel portfolio overnight when it acquired three aparthotels in Central London for £230 million.

Travelodge acquired 66 Travelodge-branded hotels from its largest landlord – LXi REIT – for £210 million, with support from owner GoldenTree Asset Management. At the start of December, meanwhile, KKR and Baupost snapped up 33 Marriott International hotels in the UK from ADIA. Alternative lender Cheyne underlined its faith in UK fundamentals as it loaned Fattal £525 million to refinance four London properties, namely the NYX Hotel London Holborn, Leonardo Royal Hotel London City, Leonardo Royal Hotel London Tower Bridge, and Leonardo Royal Hotel London St Pauls.

Another major portfolio deal took place in the Netherlands, where Fattal inked a deal for 12 hotels for €360 million from KSL Capital Partners, signalling its intention to continue expanding its already considerable presence in the Benelux region. Five of the hotels are in Amsterdam, with the remaining seven located in the cities of Rotterdam, The Hague, Eindhoven, Groningen, and Maastricht. Fattal European Partnership, the European investment arm of the Leonardo Hotel Group has raised some €420 million in the past year for its third European hotel fund and says it is already ahead of its deployment targets. Guy Vardi, co-managing director of partnerships for the Fattal Hotel Group, tells Hospitality Investor: “Being an owner-operator gives us the possibility to access transactions that the typical financial investor is not able to execute.”

In a sign that Central Europe is back on the deals table, CPI Property Group sold a 50 percent stake in a subsidiary that owns eight hotels in the Czech Republic to Bratislava-based Best Hotel Properties.

Transaction trends

Duffey sees ongoing evidence that hotel investors have clear preferences for budget or luxury, with some reticence about the middle ground still on display. “Limited-service hotels are easy to understand, while sentiment is also supporting the luxury model,” he says. “Some investors will even take a mid-range property and move it up or down a class.” He cites the Caledonian in Edinburgh, which repositioned as a Curio Collection hotel this summer after dropping the Waldorf Astoria branding. Luxury deals this year have included the Morgan Stanley and Quinspark Investment Partners deal for the Pullman Paris Tour Eiffel from French REIT Amundi for around €350 milllion.

He also notes increasing interest from investors in the extended stay, branded residential and hostel categories, all evidenced by key deals this year. Living specialist Greystar inked a three-asset deal in Spain in the extended stay segment, echoing Pandox’s aparthotel buy in London. Says Duffey: “Clients and investors love the extended stay model, but a lot of the product still needs to be created in Europe.”

In the mergers and acquisitions space, Germany’s Motel One was placed back in the hands of its founder in a deal valuing the company at €4.1 billion. However other mooted transactions, such as a rumoured takeover of citizenM, failed to complete.

Duffey concludes: “It has been an impressive year for major trades and large single asset deals, but the M&A platform space is still quite challenged. As the market continues to strengthen, further consolidation could be on the cards next year.”

By Isobel Lee