Research - JULY 13, 2017

German institutional hotel market hits the €50b mark

by Jody Barhanovich

Union Investment and bulwiengesa have calculated the market volume of investable hotels in Germany again.

According to their calculations, the market value of investable hotels in Germany increased by 8.3 percent to €51 billion ($58 billion) between 2015 and 2016. This was due primarily to the ever-healthy rate of construction of new hotels and B&Bs that resulted in a net increase (factoring in both openings and closures) in the number of beds of around 0.7 percent in Germany. At the same time, the performance of German hotels also improved in 2016 in the form of higher room utilization and growing average rates, which were reflected in increases in value.

“The general conditions for the domestic hotel market are almost ideal,” said Dierk Freitag, divisional manager and partner at bulwiengesa. “The German hospitality industry experienced growth in the number of national and international tourists for the seventh year in a row in 2016.”

Union Investment and bulwiengesa identified a portfolio of around 376,600 hotel rooms spread across small, medium and large cities in Germany as an investable supply. In 2016, the average value was calculated to be around €135,600 ($154,622) per room, compared with €130,500 ($148,806) in 2015.

Hotel transactions in Germany hit a record high in 2016. The roughly €5.2 billion ($5.9 billion), including development projects, now corresponds to around 10.2 percent of the calculated total market, compared to 9.3 percent in 2015. Roughly 10 percent of the market volume in Germany was traded in 2016.

“The volume of transactions is growing even faster than the market. This indicates that the hotel asset class is becoming increasingly popular amongst investors,” said Martin Schaller, head of hospitality asset management at Union Investment Real Estate GmbH.

According to the calculations, the market value of hotels operated increasingly by hotel chains — and therefore fitting into the investable universe of numerous investors — grew in B-rated German towns and cities in particular.

“In terms of growth dynamics and value development, some B-rated cities could be the A-rated cities of tomorrow,” said Freitag.

The market value model is based on data from companies, official statistics and trade associations. It facilitates a comparative analysis of the institutional hotel market for the years 2007 to 2016.


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