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Wealthy Russian investors in Germany: a Tranio study
In 2017, the company Tranio studied the audience of investors from Russia and other countries of the former USSR, buying in Germany profitable real estate worth from 1 million euros.…

Continue reading →

Hotels in Europe: markets and prospects

According to the UN World Tourism Organization (UNWTO), in 2016 the number of tourists traveling abroad broke a new record: 1.235 billion people. Nearly half of them (615 million) traveled in Europe – this is the most popular travel destination in the world.

Along with the number of tourists, the hotel business is growing. According to PwC estimates, the total volume of investments in this sector in Europe in 2016 was 18.7 billion euros. Although it is 9.7% lower than the record over the past 10 years, 20.8 billion, in general, analysts say a steady increase in the flow of investment since the last crisis in 2008–2009.

Investment in Europe hotels
If we discard portfolio transactions and take into account only a few, then in 2016 a 10-year record was set: more than 9 billion euros were invested in hotels in Europe.

Why the market will grow?
In 2017, PwC conducted a survey of investors about different types of real estate in Europe: 70% of respondents described the prospects for investment in hotels as “good” or “very good” (51% and 19%, respectively). There are several reasons for this optimism:

1) The number of tourists will continue to increase
In addition to the fact that half of all travels in the world occur in Europe, four out of five countries that have led the ranking of countries in the world in the Travel and Tourism Competitiveness Index in 2017 are in Europe: Spain, France Germany and the UK. According to experts, this year the number of tourists in European countries will grow by another 2-3%.

The forecast of the tourist flow is directly related to the welfare of the citizens. according to UNWTO estimates, the largest expenses in 2016 were made by tourists from China (235.9 billion euros). They are followed by citizens of the USA, Germany, Great Britain and France – the economic condition of these countries will largely determine the development of international tourism in the future.

According to the forecasts of the Trading Economics Information Center, incomes of the population and GDP in these countries will grow: in the UK and China, income levels will grow by 29% and 24%, respectively, and the United States will show the most significant economic growth – about 2% per year.

2) Stable demand in the segment of business tourism
Despite the fact that leisure is the main reason for most international travel (estimated at ITB Berlin, about 75%), business travel remains an important segment of this market.

According to the results of the American Express Global Business Travel survey, in 2017 there will be more international meetings, conferences and exhibitions, meetings of top managers of major companies and expert councils than anywhere else in Europe.

According to the majority of respondents, the cost of travel in large organizations in 2017 will increase by about 1%. Thus, we can talk about a stable demand for hotels in this segment in the near future.

Hotels fit organically into a co-consumption economy format. I think that the segment of apartment hotels (where the rooms are separate apartments) will grow more and more – people will live there for several weeks or months, periodically moving to a new place of work.

3) Favorable economic environment
The viability of investments largely depends on the overall economic situation in individual countries and the region as a whole: stable growth partly guarantees the reliability of investments.

According to the data of Trading Economics, the annual GDP growth of the European Union until 2020 will be about 2%, the unemployment rate in the region will decrease by 1.6%, and the income of the inhabitants of the Eurozone will grow by almost 9%.

In Spain, one of the most popular tourist destinations in the world, experts predict a positive trend, at least until 2020: annual GDP growth by an average of 0.6%, unemployment decline by almost 4%, and income growth by 13%.

4) High yield and long-term rental
Hotels remain an attractive asset class for two reasons:

– they bring a relatively high yield: 4–6%, whereas, for example, street retail – 3–4%, and renting out for a long-term rental apartment – only 2-3% per annum;

– in the case of a large hotel, you can enter into an agreement with an operator for 10–20 years.

Where to invest more profitable?
According to experts, the terrorist attacks did not affect the number of trips, but their direction. According to preliminary data from UNWTO, in 2016, among the most popular destinations, tourist flow significantly (by 10% or more) increased in Cyprus, Bulgaria, Portugal and Spain, but decreased in Turkey (−29%), Belgium (−13%) and France (−5%).

In our opinion, France, despite the turbulent situation, will maintain the position of the largest tourist market. Resort Spain and Italy and stable Germany will remain in demand.

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