In 2022, German hotel investment volumes reached €2.0bn. This was 20% below the previous year and 42% short of the 10-year average. Transaction activity has been impacted by the rising cost of debt, inflation, recession fears as well as uncertainty around hotel pricing. Looking forward, investment activity is expected to gain more momentum in the second half of 2023, supported by a continued recovery of the operating markets.
Investment Trends— Photo by Cushman & Wakefield
Prime Yields
As a result of rising interest rates, prime yields have moved upwards by 60 bps from 3.9% in 2021 to 4.5% by year-end 2022. With the European Central Bank planning another interest rate hike of 50 bps in March 2023, we expect yields to appreciate further in the short term. No yield compression is expected before 2026.
Nature of Investments— Photo by Cushman & Wakefield
Market Performance
German hotel performance recovered faster than expected. Some hotel markets have already exceeded their 2019 RevPAR performance, while others are closing in on their pre-pandemic results. This was primarily driven by a strong rise in average room rates. Hence, major hotel chains recorded very positive results in the last quarters of 2022. As demand continues to recover, we expect trading performance to develop favourably in 2023.
Supply
German bed supply increased in 2022 by 3.2% y-o-y after recording a decline in 2020 due to the effects of the pandemic. Supply levels are back at 2019 pace, with further growth expected over the coming years, albeit at lower levels. Overall development activity has significantly slowed down due to rising construction costs, combined with higher interest rates and lower exit prices.
Demand
Demand recovered well in 2022, with overnight stays rising by 45% y-o-y to € 451m. Growth was driven by a substantial increase in domestic (+37%) and foreign overnight stays (+120%). Overall, demand was only 9% behind 2019 results, despite Q1 of 2022 being still impacted by travel restrictions. As demand continues to recover, we expect 2023 results to meet and potentially exceed those of the 2019 record year.
Sources: C&W, STR, German Tourism Statistics
About Cushman & Wakefield
Cushman & Wakefield (NYSE: CWK) is a leading global commercial real estate services firm for property owners and occupiers with approximately 52,000 employees in nearly 400 offices and 60 countries. In 2023, the firm reported revenue of $9.5 billion across its core services of property, facilities and project management, leasing, capital markets, and valuation and other services. It also receives numerous industry and business accolades for its award-winning culture and commitment to Diversity, Equity and Inclusion (DEI), sustainability and more.
