London and Paris may be the traditional prime locations in the European hotel investment market but their popularity comes at a price. As asset values continue to rise, investors are increasingly likely to turn away from the big gateway cities and focus on Europe’s secondary hotel markets where they can find better value, according to Hotel Investment Outlook 2016.
“To find yield, investors will look beyond the mainstay markets, with provincial UK, secondary German cities, Spain – both the major cities and resort market, Italy and Portugal receiving more attention,” the report states. These smaller cities are building their own globally competitive markets with good fundamentals and strong demand.
Spanish resorts have long drawn in hordes of European holidaymakers looking for a spot of sun, sea and sand but now they’re building up a fan base among hotel investors as well. Resort hotels made up 54 percent of all hotel transactions in Spain last year, with properties on the Canary Islands accounting for almost 30 percent alone, driven by the triple attractions of steady GDP growth, a depreciating Euro and falling oil prices.
While domestic demand remains strong, international tourists accounted for 64 percent of room bookings last year. Around 9 percent of visitors to Spain headed for the Canary and Balearic islands, behind only Barcelona and Madrid.
At present, domestic operators dominate the industry, but international chains are beginning to realize the potential of resort hotels, with Hyatt and Hard Rock planning to open properties this year. Hotels and Hospitality Group, says: “If forecasts are met, the Spanish hotel industry and investors can look forward to a very successful and maybe even record breaking 2016.”