Returns generated by the hotel sector in Europe during 2011 stood at six per cent, only marginally lower than the 6.6 per cent recorded for the commercial property market as a whole. The IPD Pan-European Hotel Performance Report also revealed the industry posted capital growth of 0.3 per cent over the course of last year. The UK and France offered the best returns to investors, delivering 10.4 per cent and 9.3 per cent respectively.
Greg Mansell, from IPD, said the London market helped boost the overall performance of UK hotels, while "competition amongst investors for fixed leases" was another factor that aided growth in this area of the country's hospitality industry. Meanwhile, Gael Le Lay, from AXA Real Estate, described the French hotel sector as "well balanced between fixed leases, variable leases with minimum guarantees and full variable leases". Earlier this year, Paris was singled out as one of Europe's most stable hotel markets by the Jones Lang LaSalle Hotels survey looking at investor sentiment in the industry. Jon Hubbard, chief executive officer of northern Europe at the firm, also highlighted London, Munich and Stockholm as particularly robust markets. He explained this was "reflected by their low yield requirements", adding all four cities "continue to attract a substantial amount of investor interest".
The IPD data revealed that, despite being outperformed by the wider commercial property market in 2011, the hotel investment sector is ahead when it comes to its ten-year return, generating 7.4 per cent compared to six per cent for commercial real estate assets. Hotels also did better over the course of five years, which the firm suggested demonstrates "the strength of the sector as a long-term asset class". Invesco Real Estate's Marc Socker commented: "The hotel sector has proven to deliver strong long-term returns with lower volatility when compared against other commercial real estate, which is extremely attractive to investors in the current market environment."
- Tuesday 17 July 2012