Vienna House has acquired 17 city hotels and two projects from Arcona Group, for an undisclosed fee.
Vienna House was the latest hotel company to buy its way into the German hotel market, where performance continues to rise.
In addition to eight Arcona Living and four Arcona Hotels, the purchase included five Steigenberger hotels franchised by Deutsche Hospitality as well as two projects in Greifswald and Mannheim.
Vienna House told Hotel Analyst that all five Steigenberger Hotels would remain under the brand until end of their franchise agreements. The contract for four Steigenberger hotels will finish at the end of 2019 after which they will be branded as Vienna House. The contract in Braunschweig runs until 2022.
The hotels will be managed as lease operations under the umbrella brand Vienna House. The Austrian hotel group operated and was developing over 40 hotels in Europe with a focus on city hotels under the brands Vienna House, Vienna House Easy and Vienna House R.evo.
Rupert Simoner, CEO, Vienna House, said: “The Arcona city hotels fit perfectly into the portfolio of Vienna House. Here two partners have found each other who are focusing on their brand positioning, who want to grow meaningfully from it and who also get along splendidly.”
Arcona said that it planned to focus on its holiday hotel business, having recently signed a long-term agreement with Barefoot founder Til Schweiger for the worldwide licence.
Arcona managing director Alexander Winter said: “With the remaining houses and the Barefoot concept, we will now be concentrating fully on the growing holiday hotel market and successfully embarking on the future together with our employees.” A total of 20 Barefoot hotels were planned over the next 10 years.
Christie & Co said that it expected interest in Germany to continue to grow, with Lukas Hochedlinger, managing director – Central & Northern Europe commenting that the market remained attractive to investors, with “ increasing yields or a higher risk aversion” not yet apparent.
Berlin remained Germany’s also the largest hotel market with more than 121,000 beds and 27.1 million overnights in 2018. In the last five years, bed supply has increased by 10.7% and overnights grew by 14.9%. While the first half of last year performed as expected, multiple trade shows and events meant that Christie & Co reported revpar up 6.9% on the year to EUR79 the largest revpar growth of the country’s top six cities.
Patrik Hug, senior consultant advisory & valuation services said: “Currently, branded limited service hotels are most sought-after. New concepts that combine co-working, sleeping, socialising and innovative food concepts are moving into the German market to meet the digital native’s needs, where the large hotel chains lack agility. Berlin and Munich continue to be prime spots on many wish lists for development, however we expect a greater diversity and interest in the other cities as well.”
The broker said that the continuing demand surge reflected the cities’ attractiveness and even as supply was increasing, most cities seemed poised to absorb this supply in the medium term. As in 2018, the top six expected considerable supply increases, which may, the company said, lead to below average performance growth in the short run. Depending on the trade fair cycle in some markets, such growth may even be deferred to 2020.
Hug told us: “The cycle is at the top and it is hard to get a good deal – for some it is too expensive to invest in hotels, or the focus is shifting to B and C cities where there are still good deals to be made. It’s a bit more opportunistic. The lease model isn’t going away, but most cities have become really expensive and you have to be ready to pay hefty prices, it’s really tough to get a lease which is sustainable – it’s interesting what people have started to pay. In Munich the top yield is probably 3%. There is still too much money around, but in the top six cities this is unlikely to be an issue because the hotels are branded, with good distribution.”
HA Perspective [by Katherine Doggrell]: Talking about Whitbread might seem an obvious thing to do at this point, but the obvious need not always be bad. Here we see Vienna House, which wanted to be in Germany, buying its way into Germany because that is what it needed to do. Indeed, there are parallels here with Whitbread’s Foremost deal, in that it was a slightly messy transaction – one of the hotels won’t join the brand until 2022.
For those who wish to play in Germany, but don’t want to pay crazy prices – and Whitbread has an admirable sobriety – these messy deals are likely to be the future. Buy what you can and clear it up afterwards and, if you’re looking 50 years into the future, 2022 isn’t so bad.
As for Whitbread, in addition to being constantly harassed about its position in Germany, activist investor Elliott Advisors is back, moaning that the company’s strategy was “depressing” the company’s share price and leaving it open to a cut-price hostile takeover. It wants Whitbread to sell 10% to 15% of its property portfolio and think hard about the rest. The Premier Inn owner cannot, it seems, give its strategy 50 years to prove itself.
I bet it wishes it’d stuck with brewing.