European hotel industry looks east for 2017 investment opportunities

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Chinese and North American investors are expected to dominate the European hotel investment market in 2017, according to an annual survey by Deloitte.

According to the research from more than 100 senior hospitality industry leaders, 62% of respondents see China as the biggest source of inbound investment into Europe, up from 51% last year. This is followed by North America (46%).

Following 2015’s bumper year for hospitality M&A, deal flow in 2016 has been more subdued.

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Nevertheless, hotel executives are optimistic about the investment opportunities that lie ahead, with more than a third (34%) believing that the European investment cycle is 12-18 months way from peaking.

Close to 60% of respondents see disposals and consolidation as prominent investment themes in the next year.

More than half (52%) of hotel investors cited geopolitical instability in Europe as their number one concern for 2017, followed by deflation and lack of economic growth on the continent (47%).

Significantly, only a quarter were worried about the UK’s decision to leave the European Union, with the various European elections scheduled for 2017 generating greater unease (37%). With these concerns in mind, one-third of respondents cited the budget segment of the market as being the most attractive for investment in 2017, followed by the upscale (24%) and midscale (20%) segments.

Amsterdam has usurped London’s position as the most attractive hotel investment destination in Europe after more than a third (34%) of respondents ranked the Dutch capital in the top spot.

London (32%) had held the number one ranking for the last two years. Barcelona (28%) and Dublin (24%) followed, with Berlin and Madrid (both 18%) joint-fifth.

For the third year in succession, industry leaders have named Edinburgh (47%) the most attractive hotel investment destination in the UK outside of London, closely followed by Manchester (46%, up from 40% last year) and a resurgent Birmingham (22%, up from 9%).

In Europe, respondents believe that the Scottish capital is now as attractive to investors as the likes of Rome and Lisbon.

Nikola Reid, director in Deloitte’s hospitality advisory team said: “In the regions, trading is up as the UK becomes a more affordable and accessible place to visit for overseas tourists. Furthermore, despite initial uncertainty in the immediate aftermath of the Brexit vote, we have recently seen a rejuvenation of interest from foreign capital driven by their appetite for income and the opportunity to capitalise on sterling’s depreciation. As well as expectations for Asian capital to dominate activity, industry leaders have also highlighted domestic investment as a key driver of regional deal flow in 2017.”

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