UK leads bullish forecast for European transactions

EUROPEAN REPORT - With Savills European Investor Sentiment Survey 2024 showing a strong appetite amongst investors to increase their allocation to hospitality over the next three years, the brokerage/advisory predicts volume in Europe this year to significantly surpass 2023 numbers.

Survey respondents expect to deploy c.€10 billion during the three-year stretch, targeting more serviced apartments, lifestyle hotels and mid-market properties. Already this year, more than €1 billion of U.K. hotel assets have already transacted with full year volumes expected to surpass 2023 levels.

Savills Research Director Marie Hickey said that while private buyers and owners/operators were particularly active in 2023 and will continue to be so this year they expect mid-cap private equity and institutions to make a return in 2024, supported by the relative sector appeal, strong demand fundamentals, operational performance, and the pressure to deploy capital.

The debt markets will play a large role in shaping the investment landscape for European hospitality in 2024, according to Charlie Bottomley, director, Savills Capital Advisors, Debt Advisory. “Correctly navigating the debt environment will present opportunities for those able to adapt their approach, and as the sector continues to adjust, careful monitoring and strategic decision-making will be essential for sustained growth and profitability in 2024,” he said.

UK dominance returns

Spain overtook the U.K. in 2022 to become the largest hotel investment market in Europe. However, the U.K. regained its crown last year, recording €2.62 billion of hotel transactions, marginally ahead of the €2.61 billion in Spain.

This was driven by a marked increase in U.K. activity in the final quarter of 2023, helped by a reduction in borrowing costs and, with it, improved investor sentiment.

“In the second half of 2023, investment activity exhibited promising signs of recovery, marked by consecutive quarterly increases,” said Richard Dawes, director, Savills EMEA. “Regional volumes surged by 20% quarter-on-quarter during Q3, a noteworthy development given that Q3 traditionally experiences subdued activity. This momentum has continued with stronger Q1 2024 volumes in several key markets across the region.”

Hickey added that with demand across a number of European hotel markets still in recovery mode, there remains significant support for further occupancy growth, which will underpin rates and help drive top line performance.