While the Eu­ro­zone’s economies send mixed sig­nals, in­vest­ments in the Con­ti­nent’s lux­ury ho­tels are pay­ing off

Business Traveler (USA) - - SPECIAL REPORT - By Ralf Wal­ters

Ho­tel mar­kets in North Amer­ica, Asia and much of the rest of the world are boom­ing; by com­par­i­son, the trend in Europe looks less promis­ing. While the global econ­omy ap­pears to be re­cov­er­ing, the re­gional out­look for Europe is de­cid­edly murkier. Sen­ti­ment about the state of the Euro­pean econ­omy is im­prov­ing, but de­fla­tion con­tin­ues to be a risk and cur­rent growth is clearly“in­suf­fi­cient,”ac­cord­ing to Alexan­der Börsch of Deloitte Re­search in his Out­look Q3 2014 re­port.

The Eu­ro­zone, he says, is“send­ing mixed sig­nals,”and he be­lieves the re­gion’s fu­ture per­for­mance will de­pend, in great part, on the ef­fec­tive­ness of the Euro­pean Cen­tral Bank’s (ECB) new mon­e­tary pol­icy. De­clin­ing pro­duc­tiv­ity growth and an ag­ing pop­u­la­tion are re­duc­ing the abil­ity of Europe’s econ­omy to grow, he says.

How­ever, even in the midst of a mud­dled eco­nomic out­look in Europe, in­creased de­mand and higher room rates are still pro­vid­ing the im­pe­tus to new ho­tel growth – par­tic­u­larly among up­scale prop­er­ties. The less than bullish out­look for Europe’s cur­rent eco­nomic pic­ture doesn’t ap­pear to be de­ter­ring Euro­pean ho­tel de­vel­op­ers.

In June 2014 the num­ber of new ho­tels un­der con­tract in­creased to 910, to­tal­ing 145,244 rooms, ac­cord­ing to STR Global’s July 2014 Con­struc­tion Pipe­line Re­port. The “Un­der Con­tract”fig­ure in­cludes projects ei­ther“In Con­struc­tion,”“Fi­nal Plan­ning” or“Plan­ning”stages but not projects in an “Un­con­firmed”stage.

Cap­i­tal In­vest­ment

That doesn’t mean the ho­tel business Con­ti­nent-wide is see­ing an up­swing; some na­tions are far­ing bet­ter than oth­ers. Com­pared to other ho­tel mar­kets, STR re­ports Greater London showed the largest num­ber of rooms un­der con­struc­tion with 5,110 rooms. Seven other mar­kets re­ported more than 1,000 rooms un­der con­struc­tion: Istanbul (4,798 rooms); Moscow (3,301 rooms); Greater Am­s­ter­dam (2,020 rooms); Ham­burg (1,678 rooms); Greater Berlin (1,315 rooms); Greater Mu­nich (1,127 rooms); and Vi­enna (1,093 rooms).

“Im­proved eco­nomic con­di­tions, fall­ing un­em­ploy­ment rates, ris­ing con­sumer con­fi­dence and an in­creas­ing num­ber of ho­tel trans­ac­tions at the start of the year all led to in­vestors feel­ing very op­ti­mistic about trad­ing ex­pec­ta­tions in London,” says George Ni­cholas, ex­ec­u­tive vice pres­i­dent of Jones Lang LaSalle’s Ho­tels & Hos­pi­tal­ity team.“Cur­rently the de­mand for ho­tel in­vest­ment prod­uct is out­strip­ping sup­ply with in­vest­ment de­mand be­ing driven from the USA and Asia.”

“Ris­ing con­fi­dence”in the London ho­tel mar­ket was the theme of a Ho­tel In­vestor Sen­ti­ment Survey re­leased in late Au­gust by JLL. Fur­ther­more, in­vestors in hos­pi­tal­ity have an“ex­pec­ta­tion of strong trad­ing prospects”over the next six months to two years. Fol­low­ing London, the survey found in­vestor sen­ti­ment to be high­est in Mu­nich, Am­s­ter­dam and Copen­hagen.

Em­blem­atic of in­vestor ex­u­ber­ance in the UK, Dou­bleTree by Hil­ton re­cently cel­e­brated the open­ing of its lat­est

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