• UK hotel investment demand remains high in Q2 2018
  • Increasing liquidity and pressure on yields amid growing investor demand

Hotel real estate investment in Europe reached €21 billion in the 12 months to Q2 2018, representing a 5.8% increase in transaction volumes year-on-year, according to the latest data from global real estate advisor CBRE. Total investment volumes of all real estate sectors in Europe saw an increase of 4% on the same period last year.

Q2 2018 European hotel investment activity was driven by robust growth and continued investor demand, particularly in the UK, Germany and Netherlands. UK hotel investment volumes accounted for €8.2 billion in the twelve months to Q2 2018, reflecting a 95.1% increase year-on-year, a notable recent deal included the Project Ribbon pan-UK portfolio of mainly Holiday Inn hotels, which sold for £742m in May. Germany was Europe’s second largest hotel investment market in the first half of 2018, with investment volume increasing by 5.8% year-on-year, reflecting an increase in market liquidity.

Similarly, the Netherlands experienced strong performance, with an 83.5% year-on-year increase in hotel deal volume which has been driven by a sustained level of increased investment activity over the last four quarters.

Germany continues to be a key country market for hotel investment, attracting an increasing amount of foreign capital. In the first half of 2018 German hotel transaction volumes reached €1.9 billion and this was attributed to a number of large single asset transactions, including the acquisition of the Hilton Berlin by Aroundtown for €297 million and the sale of the Leonardo Royal Munich for €157 million to Invesco Real Estate. 
Olivia Kaussen, Head of Hotels, CBRE Germany
Colin Low, Head of Investment Properties, EMEA, CBRE Hotels
The general growth in discretionary consumer spend and the heightening demand for experiential travel make for positive European Hotel sector fundamentals.  Consequently, we are seeing robust demand from investors looking to capitalise on these trends. The hotel sector offers investor income options ranging from fixed to fully-variable; consequently, the capital being deployed into the sector is diverse, spanning core to opportunistic. 
Colin Low, Head of Investment Properties, EMEA, CBRE Hotels

Portugal also performed well, registering an increase in the investment volume of 201.4% year-on-year and yields have fallen in Q2 2018 demonstrating greater investor appetite for hotel assets in Lisbon and Porto. Yields across most European markets have remained stable on the previous quarter amid sustained investor appetite for hotel stock. However, hotel yields in Barcelona increased by +25 bps due to the ongoing political uncertainties in Catalonia.