Institutional hotel market cracks the 50-billion-euro mark

Ten percent of the market volume was traded in Germany in 2016. At the same time, the market value of hotels in secondary German cities rose the most.

Union Investment and Bulwiengesa have once again determined the market value of hotels in Germany that are of interest to investors. According to their findings, the market value of these hotels increased by 8.3 percent to €51 billion from 2015 to 2016. Ongoing construction of new hotels and bed and breakfasts is key here; on balance (accounting for new openings and closures) there has been an increase of beds in Germany of around 0.7 percent. German hotels also performed better in 2016 due to higher room occupancies and increasing average rates, which resulted in higher values. “The conditions for the domestic hotel market are nearly ideal,” says Dierk Freitag, Division Manager and Partner at Bulwiengesa. “In 2016, the accommodation sector in Germany posted growth in tourist numbers for the seventh year in a row for both domestic and international visitors.” Like the results from last year’s analysis, the current numbers support the growing relevance of hotels as an asset class in the commercial real estate market.


Magnifier

Union Investment and Bulwiengesa found that there are around 376,600 hotel rooms distributed across small, medium and large German cities that are relevant for investment. The average calculated value for 2016 was approximately €135,600 per room, up on €130,500 in 2015.


Germany set a new record for itself in hotel transactions in 2016. The approximately €5.2 billion (including development projects) corresponds to around 10.2 percent of the calculated market volume, compared to 9.3 percent in the previous year. “The transaction volume is growing even faster than the market. This indicates that hotels are becoming more popular as an asset class with investors,” says Martin Schaller, Head of Asset Management Hospitality at Union Investment Real Estate GmbH. According to the calculations, the market value of hotels in secondary German cities rose the most. These are being operated increasingly by hotel chains, so they fit into the investment universe of many investors. “With regard to growth dynamics and capital appreciation, today’s secondary city could be the primary city of tomorrow,” notes Dierk Freitag. The market value model of Union Investment and Bulwiengesa is based on data from companies, public statistics and hotel associations. It enables a comparative analysis of the institutional hotel market between 2007 and 2016.


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