Top Tier Cities and International Gateways Offer Hope for Hotel Market in 2012

In the last few months, fears over a double dip recession have taken a toll on the stock market. One of the hardest hit sectors has been the hotel industry, because it is traditionally one of the first to feel the effects of a recession, and so investors have decided to let it feel some of the pain a little early. Understandably, another effect of this has been to cause demand to fall among hotel buyers, actually, to die off is a more appropriate way to describe the reduction.

Like the world of residential property though, not all areas are being affected equally by this problem. Last year UK house prices fell by about 4%, but in the top areas of London they grew by over 10%, in the year ending Q1 2011 house prices in France grew by about 5%, in Paris they grew by 22%, and we could go on.

The same is being seen in the hotel sector; several prime cities are seeing hotel revenues continue to grow, and while hotel stocks are still falling because of the wider situation, hotel buyers can still see that these cities present good opportunities to buy now while prices are becoming increasingly attractive. In fact, in this respect hotels in these cities become even more attractive to buyers, a: because they are now proving to be near-recession proof, and b: because the current climate brings the opportunity to pick up bargains.

According to October data from HotStats, Istanbul hotels are recording exceptional revenue growth at the moment, while Paris, London and Rome are all seeing revenue measures in decline for the month. According to the data Istanbul hotel rooms made 16% more in revenue per available room (RevPAR), 19% more total revenue per available room (TrevPAR), and a 43% increase in gross operating profit per available room (GOPPAR). Within Europe Dublin was the only other city to see any real hotel revenue growth, with a 5.9% growth in RevPAR, a 2.4% growth in TrevPAR, and a 4.2% growth in GOPPAR.

However, we see that there are no cities in Switzerland in HotStats European press release. Switzerland is currently seen as one of the world’s safe-havens because of its strong, stable economy and also its strong currency. Zurich would be the prime city for hotel investment in Switzerland.

In the Middle East HotStats sees the biggest growth in hotel revenues in Dubai.

Several cities in Germany have recently been highlighted as having the potential for massive growth in the hotel sector. Hamburg is seeing massive growth in the commercial sector, the hotel sector looks undersupplied and undervalued in the city, and hotel investors are paying very close attention to Hamburg.

Jones Lang La Salle has just named their top 5 cities for hotel acquisitions in its bi-annual Hotel Investor Sentiment Survey. The report said:

“In the short-term, the markets that ranked highest for acquisition targets across the globe include Scandinavian cities Stockholm (66.7 percent) and Copenhagen (62.5 percent). Chicago, Milan and San Francisco round out the top five cities.”

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