European Hotels Prove Resilient Thanks to Middle East Interest

Investment in European hotels continues to weather wider economic pressures in part thanks to an influx of capital from the Middle East.

(Bloomberg) — Investment in European hotels continues to weather wider economic pressures in part thanks to an influx of capital from the Middle East.

Despite high financing costs and broader inflationary pressures the value of transactions in European hotels increased by 18% in the first quarter of 2023 compared to the period last year, according to a report from Cushman and Wakefield Plc. Total deal value was €4.1 billion ($4.5 billion) in the first quarter and €18.6 billion in the twelve months through March.

That was boosted by investment from the Middle East, which increased by 500% in the first quarter thanks to large deals like the purchase of the Westin Paris-Vendome Hotel by Dubai Holding LLC in February. An Abu Dhabi fund reportedly bought the EDITION Hotel in Reykjavik in early January.

The report found that investments into resorts are holding up well, increasing by almost 50% to €3.7 billion. That underlines the resiliency of the leisure industry despite tough macroeconomic conditions as more flexible working patterns supports demand for travel.

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Hotels are also attractive in the current environment because the use of management agreements rather than traditional leases helps hedge against inflation. That’s because property owners and hotel operators can share the income generated by each asset instead of relying on a fixed long-term rent.

–With assistance from Jack Sidders.

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