Cost savings and strong investor appetite keep hotel stocks relatively firm, HVS report says
London – European hotels saw a recovery in values in 2021, boosted by cost savings, strong demand in the second half of the year and continued investment interest, according to the annual report European Hotel Rating Index published this week by the world hotel council HVS.
The report indicates an average improvement of 5% in values compared to 2020. The fact that investors have maintained their interest in hotels during the pandemic has kept values fairly stable, especially in properties with good potential and in locations strong, which stimulates demand for offers at realistic prices. There was no real volume of distressed selling in the market and as the trading outlook improved this was reflected in the recovery in value across all markets.
In the ratings of 130 hotels in 33 European cities, HVS research reveals that around 60% saw their value fall by 5% to 15% in 2020. In 2021, more than three-quarters of these properties saw their value increase, with those that were not primarily those undergoing renovations involving periods of closure.
“Markets that saw stronger value recoveries in our research were gateway cities, which saw increased demand from summer 2021, or those that were well positioned to benefit from inland leisure demand” , co-author of the commented report Mathilde De Bonaanalyst at HVS London. “The strong investor appetite for the hospitality sector remains as the amount of unallocated capital is still at record highs and interest rates are relatively low,” she added.
“Hotel performance in the first half of 2021 was hammered by the pandemic but, starting in the summer, the easing of travel restrictions gave way to a remarkable recovery in demand in a number of markets until when the Omicron variant arrives in November.”
The fact that operators have learned to adjust their operations and improve efficiency, coupled with improved RevPAR in 2021, has resulted in a return to profitability for many hotels, albeit modest. However, inflationary pressures, rising energy costs and the scarcity of talent began to weigh on performance in the second half.
This year’s HVI highlights the adoption of an appropriate ESG (environmental, social and governance) policy as vital for hotel operators and owners, which is now increasingly at the heart of every financial transaction. . Adapting to labor scarcity is another major challenge, with hoteliers urged to become more creative in attracting talent through tailored training, providing a better work-life balance for staff and more diversified career prospects.
“A fundamental change in image, a more flexible approach to work and an increased use of technology will be needed to fill the current staffing gaps in the sector. This will have the benefit of improving RevPAR, profitability and ultimately helping to sustain values,” adds De Bona.
“Given the right circumstances, demand has rebounded from the lockdowns and severe travel restrictions at a faster rate than even the most optimistic users would have imagined,” co-author of the report concluded Nikola Miljkovican associate of HVS London. “The case for hotel investment remains stronger than ever and as new challenges have emerged, such as the Covid Omicron variant and now the war in Ukraine, it is heartening to see the resilience of the hotel sector in the face of these multiple hurdles.”
A full copy Hotel Valuation Index by Mathilde De Bona and Nikola Miljković can be downloaded here http://www.hvs.com/article/9302/hvs-european-hotel-valuation-index-in-depth-insights-2022/.
HVS is the global leader in consulting and valuation services focused on the hospitality, restaurant, condominium, gaming and leisure industries. Founded in 1980, the company performs over 4,500 assignments per year for virtually every major player in the industry. HVS directors are considered the best professionals in their respective regions of the globe. Through a global network of over 50 offices staffed by 300 experienced industry professionals, HVS provides an unrivaled range of complementary services for the hospitality industry. For more information regarding our expertise and the specifics of our services, please visit www.hvs.com.