Consolidation among major hotel companies will be one of the key themes of 2015 as large groups seek to grow their business or risk being taken over themselves. This is the prediction from specialist global consultancy HVS London.
The agency’s chairman Russell Kett says now is a good time to develop, acquire or invest in hotels “as economic prospects are encouraging with demand for hotel rooms increasing and many parts of Europe having capacity for further rooms”.
HVS says its research shows conditions in Europe’s hotel markets improving leading to rising values, expected for the next few years.
“Organic growth is a relatively slow way to expand, so hotel companies will be looking for opportunities to make quantum leaps, typically by buying other hotel companies and driving more value through economies of scale,” says Kett.
“Global hotel companies either have to acquire to maintain their growth strategy, or be prepared to be someone else’s target for acquisition. If you’re not dining, you’re dinner.”
While the major cities of London, Paris, Rome and Amsterdam remain prime investment locations, hotel investors are also looking at cities such as Barcelona, Hamburg, and Munich, which HVS has highlighted as development ‘hot-spots’. Cities to be avoided for new hotel development, according to HVS, include Athens, Budapest, Kiev, Vienna and Warsaw.
“The hot cities are those which we expect to see an increase in both business and leisure demand and where real estate investors are likely to see a bigger return. It’s encouraging that investors are now looking beyond Europe’s four most popular destinations,” Kett adds.
A lack of available hotels on the market means that hotel transaction volumes are well below the levels experienced in 2005-07. According to HVS data.
“We are seeing a number of new investors in the sector including insurance companies and hedge funds, which together with sovereign wealth funds, high net worth individuals and private equity firms ensure there is keen interest. Indeed, it is likely that the major hotel transactions this year will be dominated by private equity buyers.
“Lack of availability as well as improved demand and profitability should mean that hotel values continue to rise for the foreseeable future.”
Meanwhile, InterContinental London – The O2, the new 453-bedroom 18-storey luxury hotel currently in construction as part of a 7.6 acre development scheme on London’s Greenwich Peninsula, is set to create 500 new jobs.
Opening late 2015 and featuring major conference and banqueting space, with a ballroom accommodating events for up to 3,000 guests, the hotel is recruiting 350 front and back of house positions and up to 300 casual roles in banqueting and events.
Developer the Arora Group has committed to filling 40 per cent of the total employment opportunities from within the local community in Greenwich.
The company’s CEO Surinder Arora, describes the InterContinental London – The O2 as “the most significant new London hotel, of this size and scale, to open in decades”. Arora adds: “We are committed to working with the local council, local community organisations, universities and colleges to secure the very best talent from those that share our vision and passion to make this hotel, in this exciting destination, compete on the world’s stage.”
InterContinental London – The O2 is managed and operated by The Arora Group under a franchise agreement with the InterContinental Hotels Group (IHG).
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