2021 European Hotel Transactions | By Shaffer Patrick and Matthias Hecht

2021 was a year of strong recovery for European hotel transactions. A total of €16.4 billion ^[1] worth of hotels changed hands, representing 322 individual transactions, 498 hotels and 79,000 rooms. Hotel prices per room were generally more expensive than in both 2020 and 2019, led by significant price increases in single-asset transactions, particularly in the Nordics. Portfolios that traded tended to have more hotels and more rooms per hotel than in 2020, indicating increasing investor confidence. The most active investors were largely European, followed by North American investors. Asian investors were significantly more active than in 2020, while Middle Eastern investors were noticeably less active. Virtually all investor types were active buyers in 2021. Hotel Operators disposed of the most hotels. Overall, Institutional Investors and Private Equity Investors were the largest net buyers. While total volume in 2021 doubled that of 2020, it fell nearly 40% short of 2019 levels on account of significantly fewer portfolio transactions.

Single Assets

Single-asset volumes were highly resilient in 2021, doubling the 2020 volume and falling just shy of 2019 levels, as shown in Chart 1. Key drivers of volume were the UK and Spain, which collectively accounted for half of all single-asset transactions.

Chart 1: Single Asset Investment Volume 2005-21

Source: HVS – London Office— Photo by HVS

Hotels in 2021, when sold singly, were more expensive, reaching the highest average price per room ever recorded, driven by COVID-aid-related inflation and the sheer weight of dry powder in the market, as cash-flush investors bid for opportunities. Price increases were led by the Nordics, with triple-digit increases in average price per room sold in Norway, Sweden and Denmark. Transaction activity generally spiked in periods of reduced COVID restrictions, with the top times for deals being peak summer and December. While European investors dominated the single-asset transaction market, with involvement in three-quarters of transactions, the rest-of-the-world capital stack shifted. Asian investors were involved in eight times more transactions than last year. Meanwhile, Middle Eastern investors were largely inactive, a staunch contrast to 2020’s headline display of capital on the acquisition of the Ritz London. Overall, 2021 single-asset markets demonstrated significant resilience, highlighting the continued strength of the European hotel market.

Volume

Single-asset investment volume in Europe doubled to €10.3 billion in 2021;
2021 single-asset transaction volumes increased 96% compared to 2020 and fell only 15% shy of 2019, pre-pandemic levels;
As can be seen in Chart 2, volume was led by the UK (€2.8 billion) and Spain (€1.9 billion), which collectively accounted for half of all single-asset transactions.

Chart 2: Single Asset Transaction Volumes by Country 2021

Pricing & Deal Size

Single-asset hotel prices reached €260,000 per room on average, the highest level ever recorded. Compared to 2020, the average price per room was €35,000 (+16%) higher in 2021. Compared to 2019, the average price per room was €42,000 (+19%) more expensive;
Single-asset hotels transacted for €37 million on average in 2021, an increase of 9% and €3 million more than in 2020;
Nordic countries were at the epicentre of price increases, with an average price-per-room increase of 70% compared to 2020. Leading the region were Norway, Sweden and Denmark, which saw average price-per-room increases of more than 200%;
Other markets with significant price increases per room include Croatia (+288%), Belgium (+101%), Germany (+76%), Spain (+32%) and France (+19%).

The Madrid EDITION

Capital by Continent

72% of single-asset acquisitions were undertaken by European investors, followed by 14% from North America and 7% from Asia;
Asian investors were significantly more active in 2021 than in 2020, with €712 million in acquisitions and €425 million in disposals, which was largely driven by a single transaction, the Holiday Inn Forum Kensington, in London, bought for £355 million by Fragrance Group (41.3% of the Asian acquisition volume). Asian investors had been virtually inactive in 2020, with only €100 million in total single-asset activity for the year;
Middle Eastern buyers were notably absent from 2021, with only €50 million in single-asset activity for the year;
North American companies were net buyers for the year with €650 million more in acquisitions than disposals, while Europeans were net sellers, with €275 million more in disposals.

Notable Transactions

Presented in Chart 3 are a selection of single-asset transactions that occurred over the course of 2021. To access the full list of transactions, please contact [email protected].

Chart 3: Notable Single-Asset European Transactions in 2021

Portfolios

Portfolio transaction volumes in 2021 doubled compared to 2020, as shown in Chart 4. Compared to the previous market peak in 2019, however, volumes were still down by more than 50%, signalling that there is further recovery still to come. As shown in Chart 5, key drivers of volume were the UK and Spain, which collectively accounted for half of all portfolio transactions.

Chart 4: Portfolio Investment Volumes 2005-21

Pricing on a per room basis was generally flat compared to 2020, showing only marginal growth. Despite this, portfolios overall were more expensive than 2020, as transactions tended to include more hotels per portfolio and more rooms per hotel, resulting in noticeably larger deal sizes. Some markets, such as Sweden, Portugal, Spain and Germany, saw increases in average price per room compared to 2020, but other key markets, namely the UK, saw significant declines in pricing. Transaction activity was generally highest during the second half of the year, spiking in June and July, which collectively accounted for more than 40% of all portfolio activity. Europe and North America collectively accounted for 95% of all portfolio acquisitions, with key markets such as Asia and the Middle East remaining largely inactive, as was also the case in 2020. Overall, 2021 was a strong bounce back, with nominally higher prices, more deal activity, and more assets per deal, though portfolio transaction volumes were still 60% below that of 2019 and more than 30% down compared to 2018.