• Asian investors stake out Europe

A flurry of deals has demonstrated that Europe’s hotel market is on the up once more, with both investors and operators looking for consolidation opportunities as country markets start to pick up. Significantly, it is Asian money that is making the running on several of the major transactions as groups bid to stake out the continent.

Hotel group Louvre is targeting the German market, with a plan to build a portfolio of up to 50 hotels in a partnership of backers led by private equity fund A Capital. The team have made their first investment, buying 10 hotels from the DHM Group and picking up three and four star hotels in Frankfurt, Koln, Dortmund, Bremen and Mannheim. Currently operating under the Balladins brand, the hotels will be renovated and reflagged under Louvre’s Tulip Inn and Golden Tulip brands.

A Capital has previously invested in Club Med, and takes some of the credit for re-orienting that business to take advantage of the Chinese market. Likewise, it is expected to help position the Louvre brands in the minds of outbound Chinese travellers heading for Europe.

“This unique partnership will allow us to reach a critical size in Germany,” said Matthieu Evrard, Louvre chief development officer. “With this transaction we will double our footprint in the German market and we will create a platform for further investment in the near future. A Capital will bring its strong understanding of the German market and its support to attract tourists from emerging markets, in particular China, into Germany’s major cities.”

Andre Loesekrug-Pietri, founder of A Capital, said of the deal, its first in Germany: “This transaction demonstrates our unique capacity to implement our sector focused fund strategy and build smart partnerships with leading industrial players.”

In Germany and Belgium, Thai investor Fico Corporation has spent EUR80m buying a portfolio of nine hotels under the Days Inn, Ibis and TRYP flags, its first step in a plan that will see it looking for a further 20 properties over the next two years. The deal has been backed by a EUR45m short term loan from Krungthai Bank.

In contrast with Louvre’s acquisitions, Fico appears to be planning to retain the existing brand flags. In Germany, it has taken on Days Inns in Berlin West and Dresden; Ibis properties in Erfurt Ost and Gelsenkirchen; and TRYP hotels in Bad Oldesloe, Berlin East, Leipzig North and Garden Bad Malente. There is one Belgian property, the TRYP in Antwerp. “The group was looking at opportunities in Europe, and this portfolio will strengthen our core hospitality business,” said Fico’s Krit Srichawla. He told the Bangkok Post the acquisitions were expected to deliver an 8-9% yield.

Fico has been expanding its interests in hotels, and currently owns 16 Thai hotels, operating under flags including Novotel and Mercure. It has a further five in development, and also owns several restaurant brands as well as having a stake in the franchise holder of Domino’s Pizza in Thailand.

And consolidating its position in Central Europe is Czech management company CPI, which has added 10 new hotels to its roster, and expanded outside its home country for the first time. CPI, which until 2007 traded as Fortuna, has taken over management of the Mamaison hotels and residence properties, including three properties in the Czech Republic as well as hotels in Bratislava, Warsaw, Budapest and Moscow. It has also picked up management of the Parkhotel Vienna Bielsko Biala in Poland.

“This is our first venture into foreign markets,” confirmed CPI chairman Jan Kratina. “The inclusion of Mamaison hotels and residences into our portfolio is a significant step forward.” The hotels will continue to operate under their existing brands, and will sit alongside CPI’s 18 existing properties running under Choice’s Clarion flag, and the Fortuna, Buddha-Bar and Spa & Kur brands.

In London, recent activity has been at the upper end of the market, with rebrands shuffling the pack. Italian chain Starhotels has acquired two properties, the Pelham and Gore, paying more than GBP43m for the 101 rooms in the two four and five star properties. The pair were sold by KPMG on behalf of private owners Con Ring, attracting a range of international buyers. “The deal further demonstrates the continuing strong appetite from overseas for well-located real estate in central London,” commented KPMG’s Neil Meredith. Starhotels currently has 22 hotels across Italy, in Paris and New York.

Also changing brands is the Cadogan, which landlord Cadogan Estates will refit with fewer, larger rooms before a reopening in 2016 under the Belmond flag. The USD48m refurbishment will reduce the room count from 64 to 54. Belmond, formerly Orient-Express hotels, currently has no representation in the UK capital, running the 32 room Manoir aux Quat’Saisons in Oxfordshire.

And in the four star space, sector newcomer Mike DeNoma has delivered another of his promised new brands into the market. Every Hotels will be delivered by glh, backed by Guoman Leisure, and will launch with conversions of some of the group’s existing London estate. DeNoma intends to build Every up to 50 hotels by the end of the decade, promising it as a great conversion brand for tired four star properties. “The four star sector continues to bury its head in the sand, in the face of changing consumer needs,” he commented. “Every is our direct response to owners and developers burdened with legacy buildings who are keen for a new four star option that responds to the changing market.”


HA Perspective [by Chris Bown]: Hotel investors appear to have a more optimistic outlook than the International Monetary Fund, when it comes to Europe’s economies. The IMF’s latest assessment warns of the dangers of deflation, continuing high unemployment and the need for intervention – through asset purchases, or quantitative easing – to ensure the numbers remain positive. The worry is that, with little credit being advanced, investment and growth will remain slow for years to come.

However, both the German and UK hotel markets are looking considerably stronger than they were a year ago, with occupancy and rate figures improving. At consultants JLL, Christoph Harle says their prediction of a c20% increase in deal volume in the German market to EUR12bn looks to be about right. A lack of new construction continues to favour sellers, with yields moving in. Similarly the UK has also yet to see much new construction, putting owners in a good position as revpar improves. With finance now easing, new builds will start to make an impact in the German market in the next two to three years, with the UK a little way behind.

Louvre’s move into Germany is a brand play, with the company taking hold of a portfolio of smaller hotels, in secondary locations that will require capital expenditure. From this, however, it will be better placed to pick off and add individual hotels in the prime German cities.

There is some talk of the Asian investors linking their buying to marketing activities in home markets. The growth in Chinese visitors to Europe is set to continue, and those who can sell their hotel brands effectively in this massive source market stand to do well.

One worry expressed by commentators in the wider commercial property market, is the extent to which these newer investors plan to hold their acquisitions for the longer term, compared to their forebears. Writing in Property Week, Richard White, head of real estate at KPMG, expressed concern for the liquidity of the market, as this change is likely to reduce deal churn. While agents may wish for more deal activity, for the hotel brands and managers, the prospect of an aligned, long term owner is probably no bad thing. 


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