Hotels embrace their (Austin) powers 

This week’s IHIF was full of people doing the Austin Powers finger to the lip and chuckling ‘ONE MILLION DOLLARS’. And that was just Michael Levie. Or, in his case, four billion. See also: Motel One (four billion) rumours about Midstar (one billion) and more of the same at Atom Hotels (one billion). 

Celebrating a recent unicorn valuation was Mews co-founder Richard Valtr, there to persuade attendees that the right PMS could surely help reach these lovely round numbers. He was joined by Alliants CEO Tristan Gadsby in banging the technology-can-make-cash drum. 

It led to a buoyant mood, but then when is the mood at IHIF anything but? Hoteliers like getting out and about and even us hangers on flexed our toes and saw the backs of people’s heads. With all these deals bobbing about (plus the ongoing Accor/Hyatt rumour [some billion dollars]) the promise of change and fees held something for everyone. The much promised shakeup which was expected during the pandemic seems to be underway and under slightly cheerier circumstances. 

Cheerier than last year, when HVS reported that high inflation and interest rate rises in Europe pulled transaction volumes down by 19% on the year, reaching €10.7bn, with 388 hotels changing hands – and an average price per hotel that was 9% lower than in the previous year.

Spain and France accounted for 44% of total investment volume, emphasising the renewed focus on southern European leisure markets and displacing the UK from the top.

While many transactions chatted over at IHIF were still in the hopes and dreams phase, concerns over the cost of debt have not held everyone back and enthusiasm is growing.

In the UK, Cushman & Wakefield reported that approximately £1.7bn of UK real estate was transacted by hotel investors in the first quarter of 2024, up 138% on the year. 

The Q1 2024 volume covered 93 properties across the UK, representing c. 7,600 rooms. Two portfolio deals: the Edwardian UK Radisson Hotel Portfolio and the LXi REIT Travelodge Portfolio comprised 60% of transaction volume. Private buyers were the driving force in deals completed at 69%, followed by public investors (23%), and institutional-backed capital (8%).

Matthias Hecht, senior associate at HVS HWE, said: “Investment activity is already fairly strong this year and the rise in brand offerings and differentiation by various hotel groups will continue to lead to increased conversion acquisitions and this, combined with the huge weight of capital ready to be deployed, looks positive for more hotel transactions.” 

A record year awaits, but what will it mean for the sector? These are big numbers and big deals which will push hotels further into the mainstream as an asset class. Attendees canvassed in a highly-scientific fashion around Moscow Mules, in cabs and while fiddling with an old telegraph machine (thank you, Christie & Co) confirmed that yes, hotels really are a thing now. And not just because of the sound of torrential weeping from retail and offices. 

With great power and numbers comes great responsibility. While there are always going to be people who buy hotels because they want something with a lot of marble to show their mates, there is going to be lot more pressure and proof required in the sector by owners who want optimised performance and results. 

The mood at next year’s IHIF might come with more of a side of moaning about demanding overlords. But we have the tools at our disposal to rise to the occasion. Not only technology, but brands which are more than just a logo, experienced asset managers, imaginative teams eager to create memorable experiences for reasons other than bedbugs. 

Groovy, baby, yeah. 

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