Outlook for European Hotel market in 2020 from HVS
HVS has prepared a summary overview of their outlook for the European hotel market for 2020 and beyond. As always HVS are professionals that do have a solid understanding of hotel markets in Europe US and indeed worldwide. It is interesting that they see only pockets of opportunity which I see as their way of saying that despite good growth in many markets the new supply e.g. new hotels that have opened or will be opening over the next few years the upside in revenue per available room revenue increases will be limited. Hence there is a limited on the increase in returns to investors and thus also value increases. The compression of yields which has been one of the primary causes of value increases in hotel real estate in recent years due to ultra low even negative interest rates in countries like Germany has played out. There is no more room for further declines in yields. This seems particularly appropriate as the perception of risk in hotel real estate assets may increase again as in some markets revenue per available room have started to decrease across Europe. In terms this will tend to increase the relative returns required from hotels by investors so may lead to increases in required yields from hotel real estate. However this may still take a few years to play out as the additional supply in several markets will only materialise over the next couple of years.
We will have to follow developments with interest and see where exactly the pockets of opportunities lie in Europe and else where.