German Hotel Investment Market In The Doldrums In 2023, But Positive Signals For 2024

The purchases and sales were almost exclusively individual property transactions, with an average volume of around 20 million euros.

• Transaction volume only €1.5 billion in 2023

• Fall of 23 percent compared to 2022

• Weakest result since 2012

• Focus on value-add and operator-free deals

• Portfolio adjustments as catalysts for higher sales in 2024

With around 60 percent of the transaction volume, investors from the United Kingdom were the major contributors followed by German investors with 35 percent and Israeli investors with 5 percent. Institutional investors were the most active investor type with a market contribution of 38 percent. However, their proportion is far smaller than before the turnaround in interest rates. Private equity investors accounted for 36 per cent and all other investors such as hotel operators, private investors and developers accounted for 26 per cent.

Transaction activity in 2023 was mainly limited to operator-free value-add properties with repositioning potential. Private equity investors specialising in hotels and financially strong hotel operators were the typical buyers. On the other hand, core properties or hotels in as-new condition with long leases rarely found a buyer. The inactivity of institutional investors has left a large vacuum in this area and ultimately led to this low result, commented Josef Filser, Head of Hospitality Germany & Austria at C&W.

The largest transactions in Q4 2023 included:

• The Europe-wide sale of the hostel operator A&O with a total of 28,500 beds by TPG Real Estate to a joint venture of the StepStone Group and Proprium Capital Partners for the equivalent of EUR 800 million. The chain includes ten German hotels with a total of 9,280 beds.

• The sale of Center Park Allgäu in Leutkirch to European investment manager TwentyTwo Real Estate. The sale included 750 of the 1,000 holiday homes, as well as the park’s main sports and leisure facilities. It is operated by the French Pierre & Vacances Group.

• The purchase of the Azimut Hotels in Dresden, with 64 rooms, and in Erding, with 54 rooms, to Trescher Verwaltungsgesellschaft from Munich. The seller was a subsidiary of the Russian Azimut Hotel Group. In future, both hotels will be operated under the new Andante Hotels brand.

• The sale of the 134-room Relaxa Hotel in Ratingen, as part of the mixed-use Calor Carré property, to Philipp Tecklenburg's investment and development company Westgard. The seller was the German LEG Group.

Josef Filser on the outlook for the hotel market: Although 2023 saw the worst annual result since 2012 for the hotel investment market, there are several signs that give a glimmer of hope. These include sharply falling inflation rates and the first signs of falling interest rates, as well as the robust development of hotel performance. In addition, we are currently seeing a certain degree of price stabilisation, which will lead to increased security in the transaction market. The low-point seems to have been reached and there is a good chance that we will see a slight revival of the market in the course of the year.

C&W expects portfolio adjustments by some institutional investors to act as a catalyst for a revival in the transaction market. In view of the challenges in the office sector, there is also an increasing willingness to invest in alternative asset classes such as hotels. C&W sees the majority of buyers here as opportunistic private equity investors. However, well-capitalised family offices and hotel operators will also take advantage of attractive entry opportunities.

Cushman & Wakefield