Hotel investors across Europe have a “wall of money” and remain confident in the sector’s ability to recover, according to hospitality consultancy HVS.
Speaking on a hospitality investment webinar, HVS London chairman Russell Kett reported “strong indications across Europe” that “business is starting to come back”.
He said: “Things have started to move in properties that have re-opened.”
Charles Human, president of HVS Europe and managing director of brokerage firm HVS Hodges Ward Elliott, insisted: “There is a wall of money from buyers that know there will be a recovery and are looking to market stabilisation.”
He said: “We’re valuing for two purposes at the moment – for banks and owners who want to get a grasp of current value and for owners who may want to consider a sale.
Human estimated hotel values had fallen by 10%-20% depending on their location and operating structure.
But he said: “We are getting to the point of competitive tension on the sales we are handling.”
He argued: “Values will recover over the longer term as cash flows improve and capital markets return to more traditional parameters.”
Kett agreed, forecasting hotel values “will get back to pre-Covid levels over the next four years”.
He noted a six-year recovery cycle following the global financial crash of 2008-09 and insisted: “We have every reason to be confident that recovery from the global pandemic can be within the same timeframe.
“There are obviously downward pressures on current values, caused by revenue and EBITDA [operating profit] declines as well as the wider economic recession.
“But there are also factors holding prices up. Supply growth is likely to slow, investors haven’t changed their strategies and [there is] ongoing opportunity for high returns post-recovery.”
Human told the webinar: “There is a continuing opportunity for high returns. Hoteliers are creative and where there is a hole left by certain types of demand they will fill it with others.”
He forecast: “London and Paris will shift more to leisure markets.”