Euro hoteliers seek efficiency, discipline, white space
Euro hoteliers seek efficiency, discipline, white space
28 SEPTEMBER 2018 8:37 AM

If transaction volume was the only indicator, it would be hard to say things are not going brightly for the European hotel industry. But as much of the selling has been done by exiting U.S. private equity, hoteliers are focused on the new need for discipline and efficiency.

LONDON—The conversation on the second day of the Hotel Investment in Europe conference, known as Hot.E, centered on the efficiencies and discipline needed in the continent as consolidation and branding gather more steam; the geopolitics causing frustration and uncertainty; and the challenges of a market seeing supply increases, few sellers and high prices necessitating complex, flexible, intuitive funding.

At the final keynote panel, titled “View from the top: Development insights,” Kenneth Hatton, SVP of global development at owner-operator Belmond—which is adding third-party management components—spoke about the slow pace of initiatives due to the onslaught of capital and competition across all asset classes.

“Three trillion (U.S.) dollars of capital have been raised by (private equity) in the last five years; only $1.7 trillion has been allocated; and that means higher leverage,” Hatton said. “This is a systemic worry, but I am not saying that cannot be solved.”

Hatton added development headaches in certain European markets led one developer he works with to remark that “after 10 years of seeking development, he understood why Rome was not built in a day.”

Samantha Ward, United Kingdom hotels sector leader at PwC, underlined a shift in capital across Europe.

“Transaction volumes were up 80% this year by June,” she said. “U.S. key funds are on the whole exiting—Starwood Capital, Apollo (Global Management), Lone Star (Funds), and the sentiment is longer-term capital looking to invest. PropCos are winning a lot of the battles because of their lower cost of capital and their longer-term views.”

Neeraj Handa, director at Cairn Group, put it succinctly when he said, “Structuring deals and finance correctly is so much more important.”

Photo of the day

Gaël Le Lay (left), of Covivio, receives the award for “mergers and acquisition/portfolio deal of the year” from JLL’s Philip Ward. Le Lay and his team won the award for the £858-million ($1.13 billion) buy of Principal Hotel Company from Starwood Capital. The other award handed out by Hot.E was for single “hotel deal of the year,” which was won by buyer Host Hotels & Resorts for its €148-million ($174 million) buy of the Hilton Amsterdam Airport Schiphol from Schiphol Real Estate. (Photo: Terence Baker)

Quote of the day
“A hotel is not a trophy asset if it has high yield.”
—David Ling, head of strategic development, CDL Hospitality Trusts, on a panel of non-European, union-based investors looking at opportunities in Europe.

Tweet of the day

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