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Taking Stock of Hotel Investment & Development in German-Speaking Markets the trend for vacations in one’s own country. In nearly all destinations, an increase of KPIs can be recorded on weekends and during holiday season. This trend is also very obvious in the German resort hotel industry, which has enjoyed strong increases in occu- pancy and rates for some years now.” EUPHORIA WITH CONTEMPLATIVE THOUGHTS At the moment, key performance indi- cators are close to optimal. But there are also warnings. “Compared to the stagnation during the financial and economic crisis between 2008 and 2010, the current development of the transactions in the German hotel property market is impressive, but also gives food for thought,” said Otto Lindner, Chair- man of the German Lindner Hotels & Resorts from Duesseldorf, commenting on current development. Since June 2016, he has also been President of the German Hotel Association (IHA). As an hotelier and cautious entre- preneur, he contemplates further: “At the moment, nearly everything is possible. The destinations, especially in Germany, are well supplied; the pipeline containing new projects is enormous. Therefore, the positive moment should be seized, but without making long-lasting mistakes, which could become a burden during the next market adjustment.” Everybody is taking part in the current euphoria of the moment. The conse- quences: increasing property and real estate prices, sky-rocketing construc- tion costs and hotel operators who are willing to pay increasing lease rates. At the same time, the yield expectations of potential buyers are decreasing, and there are some market partici- pants who were never interested in this asset class before. The banks and other capital providers are also playing along. In light of this, Lindner remains skeptical. Similarly dubious is Simoner of Vienna House, the new name for the former Vienna International Hotels. The agile and former Kempinski manager gave the group an entirely new market profile and concept within one year (2016). “In Germany, I see high speed, high prices and high aspirations,” he said. “It is important to take a good look and act wisely for the future. I often pose the fol- lowing question: Is swarm behavior really clever due to investment pressure in such a phase? I have to be sure that I will be able to afford in future what I can afford today. Because here, things can change really fast.” Dieter Mueller, Founder and CEO of Germany’s Motel One Group, and recipient of the IHIF Lifetime Achievement Award 2016, pointed out that, “There has never been such a run on the asset class of hotel properties before. This brings advantages and disadvantages for the industry. The advantages are the cheap financing opportunities. Nearly every project and every operator is financed or is able to find an exit. The disadvantage is simply the fact that too many hotels are being built because of this market environment, which will lead to overcapacities in the medium term. This applies to Germany, Austria and Switzerland as well.” Wolfgang Neumann, CEO The Rezidor Hotel Group, noted: “Real AAA locations are increasingly difficult to find. So secondary locations are very much in the focus of interest and in this way gain more importance.” Nevertheless, last year, the scene was far from pessimistic. In 2016, “located in Germany” seemed to be worth a lot, more than in the rest of Europe. RUN ON EXISTING PROPERTIES AND PROJECTS The consolidation wave of the last months, symbolically crowned by the merger of Marriott and Starwood, forming the largest chain in the world at the end of 2016, is aggravating compe- tition, both on the part of properties as well as operators. The respective inter- ests of owners and hotel operators are starting to intertwine more and more. “Presumably, much more capital would have been invested last year had there been more objects and offers available,” said Ascan Kókai, Director Development & Asset Management, Central Europe for the Spanish NH Hotel Group. He observed that many 4 potential sellers are holding back or hope for additional multipliers and thus for an enhancement in value, as long as the interest rates do not increase or at least not significantly. The lack of properties caused a run on existing properties. “At NH Hotel Group, we experienced a change of owners at nearly every fifth hotel in Germany, Austria and Switzerland last year,” said Kókai. CBRE pointed out in its analysis of the transaction market that in 2016 the four-star category was regarded as especially attractive. However, last year, the project devel- opers moved at high speed too, and this became apparent concerning the HOSPITALITY INSIDE | IHIFPDF Image | Burgenstock Taking Stock of Hotel Investment
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