CONTACTS 2012: RESERVED GROWTH WITH STRONG FUNDAMENTALS

Transcription

1 PROPERTY REPORT European Hotel Market H2 2012

2 CONTACTS RESEARCH 167, Quai de la Bataille de Stalingrad Issy-les-Moulineaux Cedex Tél. : +33 (0) Christophe Pineau Head of Research Tel.: christophe.pineau@bnpparibas.com Céline Cotasson - Fauvet Senior research analyst Tel.: celine.cotasson@bnpparibas.com HOTEL TRANSACTIONS ESTATE BN BN RIBAS REAL ESTATE Patrick Sanville - patrick.sanville@bnpparibas.com Raja Kaushal India raja.kaushal@asia.bnpparibas.com Patrick Curran Ireland patrick.curran@bnpparibas.com Julio Gallego Tortuero - julio.gallego@bnpparibas.com Olivier Ghattas United Arab Emirates olivier.ghattas@bnpparibas.com Peter Sudell peter.sudell@bnpparibas.com 2012: RESERVED GROWTH WITH STRONG FUNDAMENTALS At 6 billion invested during 2012, the hotel investment volume in,,, and the suffered a 5% drop compared to the previous year. The hotel investment market remains strong in the core markets in Western Europe The second half of the year was stronger than the previous one and posted a year-on- year increase of 7%. Even though declining, the remained the most liquid hotel investment market is expected to be a repeat of The asset-light strategy of hotel groups will offer some opportunities to buy in driven by strong hotel fundamentals. German hotels stood out with a 5% rise of their RevPAR. Spanish hotels performances deteriorated over 2012, weighed down by a sluggish domestic tourism. Similarly, RevPAR in declined, though average daily rates remain high, above 100. According to MKG Hospitality, RevPAR growth in 2013 is estimated between -1% and +0.5% in Western Europe. TE AS R BN REAL ESTATE BN AS RE BNP P February E BN AS REAL EST ARIBAS REAL ESTATE BN BN A BAS REAL ESTATE BN BN AS REAL ESTATE AS REA BN

3 Gross domestic product growth % ESTATE BN BN RIBAS REAL ESTATE International Tourism receipts TE AS R BN REAL ESTATE BN AS RE US$ billion Source : Eurostat, INSEE, BNP Paribas Forecast Source : World tourism organization (UNWTO) International tourist arrivals million * Source : World tourism organization (UNWTO) MACROECONOMIC CONTEXT Recession in the euro zone was confirmed in Q with a 0.1% fall in GDP. Outside the Eurozone the UK ended three consecutive quarters of contraction in GDP with particularly strong growth (+0.7%). These developments have come on the back of heightened uncertainty that has dominated the economic and political agenda in Europe throughout the summer. As we progressed through the final quarter of the year, some of these uncertainties abated in part due to the ECB s monetary policy action in June. Nonetheless, we expect that when all the Q4 data is released, it will continue to show weakness, with few countries escaping a contraction in economic activity. In 2013 Western European economies will embark on a slow road to recovery, with an expected overall GDP growth (+0.1%); but again the path for the individual countries will be different. National austerity measures and historical peaks in unemployment rates, reaching 11.8% in the Eurozone overall, will continue to constrain domestic demand. Therefore the evolution of external demand will take on extra importance for growth in many European economies. In the Eurozone this is helped by a weak currency. Moreover the prospect of more loose monetary policy via the ECB s OMT programme is likely to keep the euro weaker in the near term supporting external demand, including tourism, for much longer. According to the World Tourism Organization, tourism s contribution to global gross domestic product is estimated at about 5%. The contribution to employment tends to be a little higher and is estimated between 6% and 7% of the overall number of jobs worldwide (direct and indirect). For advanced, diversified economies, the contribution of tourism to GDP ranges from approximately 2% to over 10%, depending on the stake tourism takes in the economy. SLOW BUT CONTINUOUS GROWTH OF INTERNATIONAL TOURISM Over the past six decades, tourism has experienced continued expansion and diversification, becoming one of the largest and fastest-growing economic sectors in the world. Many new destinations have emerged, challenging the traditional ones of Europe and North America saw continued economic volatility around the globe, particularly in the Eurozone. Yet international tourism managed to stay on course. According to the latest UNWTO World Tourism Barometer, worldwide tourist arrivals increased by 4% in 2012 and went beyond the one-billion mark. Emerging economies (+4.1%) regained the lead over advanced economies (+3.6%). International tourist arrivals to Europe, the most visited region in the world, were up by 3%; a very positive result in view of the economic situation and following a strong 2011 (+6%). Total arrivals reached 535 million. By sub-region, CEE Countries (+8%) experienced the best results, followed by Western Europe (+3%). Southern Mediterranean Europe (+2%) consolidated their excellent performance of 2011 and returned to their average growth rates. Against the challenging economic conditions, growth is expected to continue in 2013 only slightly below the 2012 level at some 3% worldwide. BNP P 3 E BN AS REAL EST ARIBAS REAL ESTATE BN BN A BAS REAL ESTATE BN BN AS REAL ESTATE AS REA BN

4 Rolling year hotel investment volume billion Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Source: BNP Paribas Real Estate Research ESTATE BN BN RIBAS REAL ESTATE Hotel investment volume billion Source: BNP Paribas Real Estate Research Hotel investment volume TE AS R BN REAL ESTATE BN AS RE 18% 7% 4% 30% Source : BNP Paribas Real Estate Research % PRIME REMAINS THE MAIN INVESTORS TARGET As with other types of assets, the hotel investment market is running at two speeds. In high gear is the investor focus on prime hotel assets; in low gear are the poorly performing hotels that are finding no takers. The top-five tourist destinations recorded almost 6 billion of hotel investment at the end of 2012, down 5% on last year. The continued to dominate the hotel investment market at 41% of overall investment amongst our top-five markets. Hotel investment volume in the UK totalled 2.5 billion in 2012, reflecting a 31% drop compared to the same period a year ago. The regional markets activity remained quiet so London stayed the main target of investors, in particular overseas investors. These cash-rich investors continue to focus on prime assets regardless of their high cost per key and low yields. showed great resilience and remained one of the most buoyant markets in Europe for hotel investment, with 1.8 billion invested during 2012; a year-on-year increase of 59%. The French market has been propped up by a few major deals. Among them, the off-plan sale of Meliá Hotel at La Défense or the sale by Accor of the Pullman Paris Rive Gauche for 77 million. The hotel investment activity was also fuelled by the sales of 4 large portfolios amongst which the recent acquisition by Predica of 165 B&B hotels for about 0 million stands out. In, thanks to a strong second half of the year, the hotel investment volume was able to record a fourth year of consecutive increase in Indeed, the hotel investment volume amounted to 1.1 billion over 2012, up 16% on last year. profits from strong hotel fundamentals in all the main cities, Berlin witnessed the largest volume driven by the sale of the Maritim Hotel. SEB Asset Management sold it to a Qatari holding, for an unnamed sum. This sale takes place before the year-end closure of its open-ended real estate funds, partially in liquidation. At the end of 2012, saw its hotel investment volume more than double compared to However, coming from a very low base, the hotel investment volume totaled 273 million. One particularly large sale boosted the total volume; Shangri-La buying a building via Veneto in Rome for 116 million to be restructured into a hotel. For five successive years, the investment market for hotels in has been recording a decrease. It reached 432 million in 2012, 27% down on Thomas Cook sold a 51% stake of HCV - a holding company that owns five Spanish hotels and one golf club. This 94 million deal to Iberostar was part of the group s disposal program to reduce their debt is expected to be a repeat of The French activity should get off to a great start with a 0 million portfolio (4 luxury hotels) concluded at the end of January., counting on an increase of portfolio sales, should continue with the same dynamic. The level of investment volume in the UK may stay split between an active London market and problematical regional one. In, several hotels are on sale; but the negotiation process is getting longer and financing remains an issue. Similarly, the Spanish market should stay at low level as investors adopt a wait-and-see attitude. Nevertheless, the asset-light strategy of hotel groups could offer some opportunities to buy. BNP P 4 E BN AS REAL EST ARIBAS REAL ESTATE BN BN A BAS REAL ESTATE BN BN AS REAL ESTATE AS REA BN

5 Hotel performances in the top five European countries in 2012 Average daily rate RevPAR Occupancy rate % ESTATE BN BN RIBAS REAL ESTATE Occupancy rate % % Source: MKG Hospitality Source: MKG Hospitality % %.7 Revenue per available room % % % 66.3% 65.4% 61.9%.6% TE AS R BN REAL ESTATE BN AS RE Source: MKG Hospitality THE TOP THREE MARKETS KEEP ON WITH STRONG FUNDAMENTALS At the end of 2012, according to MKG hospitality, the hotel activity in the major Western European countries (, and the ) remained strong given the current economic context. On the other hand, the southern countries of and continued to be affected by the consequences of the sovereign debt crisis. enjoys a favorable trade fair calendar in At the end of December 2012, the three performances indicators of German hotels were positive. Occupancy was 0.9 point up, reaching 66.3% and the RevPAR registered one of the highest growth in Europe (+3.5%) at Amongst German cities, Berlin, Hamburg and Munich recorded above % occupancy rates and the top-three RevPAR at respectively 66.6, 66 and 83.8 respectively. Similarly, in the, all three performance indicators are in the green. The occupancy rate growth does not look significant (+0.6 pt) but the level is already high at 75.7% and the best in Europe. Over the year 2012, the average rate was up 1.6% on 2011 and the RevPAR ended at 78.2 (+2.4% compared to 2011). The multiplicity of events that were hosted in London (the Olympics, the Queen s diamond jubilee) ensured a big year in Average room rates rose by 3.6% but constrained the occupancy to a drop of 1.1 pt, yet the RevPAR was still 2.2% up. In after two years of rising occupancy rates in 2010 and 2011, a slide of -1.3 points occurred by December Thanks to an increase of 2.4% in average daily rates, the RevPAR was able to gain few euro cents. Paris posted the highest occupancy rate in the country (82.1%) and with a RevPAR of 126 remained significantly above the regional market performance. In fact, the French regions reached an occupancy rate of.7%, down 1.7 pt compared to The 1.9% increase in average daily rate was not sufficient to offset the drop, thus RevPAR slightly declined and stood at In and after two years of rising performance, both recorded a drop of occupancy and average daily rates. should register a record number of international tourists at the end of However its lodging industry remained weak due to the drop in domestic tourists who are cutting down their spending on vacations given the uncertainty over s economy. Thus, RevPAR to December 2012 was down 2.6% compared to Likewise, hotels RevPAR in dropped 4.5% over the same period but average daily rates remain at a very high level ( 100.2). Finally, hampered by strong economic headwinds across the Euro area, RevPAR growth will differ between markets in For instance London s activity could soften after its very good year. Paris or German cities are expected to remain robust, moreover will benefit from a favorable trade fair calendar. Barcelona will profit from several events that will boost hotel demand, while Madrid would continue to struggle for recovery. Milan may stabilise while undergoing a great renovation plan in order to prepare the 2015 Universal Exposition. Benedict XVI resignation should boost tourism arrivals in Rome for the conclave in March and the months after to see the new pope, as in BNP P 5 E BN AS REAL EST ARIBAS REAL ESTATE BN BN A BAS REAL ESTATE BN BN AS REAL ESTATE AS REA BN

6 GLOSSARY Arbitrage: sale of a real-estate asset belonging to one investor to another investor. Average Daily Rate: Net Room Revenue (excl. breakfast) divided by the number of occupied rooms. Immostat: an Economic Interest Group founded in 2001, through an association between BNP Paribas Real Estate, CB Richard Ellis, DTZ Jean- Thouard and Jones Lang LaSalle. In the interests of consistency, the brokers adopted numerous joint definitions: market districts in Ile-de-, conditions of buildings and premises, definitions of surface areas to be taken into account, rents, etc. The structure of the EIG guarantees the independence of data processing and respect for the confidentiality commitments of each of its members. It concerns the investment markets for corporate real estate and occupiers of warehouses greater than 5,000 m² as well as offices in the Paris area. ESTATE BN BN RIBAS REAL ESTATE Investment fund: collective ownership of financial or real estate assets managed by a regulated and certified structure (fund manager). These include: Open-ended fund: a fund is open-ended when there is no limit to the shares issued. Closed fund: shares in a closed fund are only managed by the fund manager during the subscription period. A closed fund has a limited lifecycle. Pension fund: financial body that manages the funds from the accumulative pension system. This fund is the resources that employees from the public and private sectors have set aside over their professional lives to improve their retirement pension. Opportunistic funds: targets yields of over 17%, with gearing exceeding % of the gross asset value. IRR (Internal Rate of Return): discount rate such that the sum of discounted future revenues equals the initial cost of investment. Investment volume takes into account all commercial properties BNP Paribas Real Estate is aware of, whose owner has changed during the studied period, whatever the purchasing price. Quoted investment volumes are not definitive and are consequently subject to change. Leverage effect: increasing the profitability of an investment by borrowing. NPV (Net Present Value): difference between the sum of discounted future revenues and the initial cost of investment. OAT (French Treasury bond): bond issued by the French government. It acts as a benchmark for the risk-free, long-term yield. Occupancy Rate: Ratio between the number of occupied rooms and the number of available rooms (in %). OPCI (French real estate investment fund): real estate funds. They come in two forms: - Fonds de Placement Immobilier (FPI), real-estate investment funds for which the payout is taxed as classic property revenues, - Sociétés de Placement à Prépondérance Immobilière à Capital Variable (SPPICV) Variable capital, property-dominated investment funds for which the payout is taxed as dividends and share capital gains. Overnight stays: number of arrivals multiplied by the number of nights spent in a hotel over the time period observed. Overnight stays better reflect hotel market situation than number of arrivals. Portfolio: group of several assets located in different places. The numerical data used by BNP Paribas Real Estate for its statistics feature all the information at the group s disposal when compiling them. These statistics may change according to new information brought to our knowledge that is often confidential to begin with. Pre-letting: transaction signed more than 6 months before the delivery of the building by an occupier. Property Company: a company whose purpose is to acquire or construct buildings with a view to renting them, or owning stakes in companies with the same purpose. RevPAR (Revenue per Available Room): Net Room Revenue (excl. breakfast) divided by the number of available rooms. It can also be obtained by multiplying Occupancy rate and Average daily rate. RevPAR is a more comprehensive indicator on the hotel market situation since it incorporates the effect of both Occupancy and average room rate s change on the total room revenue Risk premium: measure of the difference between an asset or portfolio s profitability and a risk-free asset (government bond). SCPI (Société Civile de Placement Immobilier): collective investment company formed to acquire and operate real estate by issuing shares to the public. SIIC (listed Real Estate Investment Company): the SIIC regime allows tax exemption on earnings as long as 85% of revenues are paid out to shareholders. Tourists: people who are travelling to and staying in places outside their usual environment for at least one night and not more than one consecutive year for leisure, business and other purposes not related to the exercise of an activity remunerated from within the place visited Business tourism: individual or group travel for professional motives for at least one night. It can be divided into 4 sectors : - Congress and conventions - Trade fairs and exhibitions - Incentive, corporate events - Individual business travel Yield: Net: ratio between net income (excl. operating costs) and the acquisition price including all acquisition costs. Initial: ratio between the net rent before taxes and charges on the date of sale and the selling price (all costs included). Prime: net lowest yield obtained for the acquisition of a unit: - of standard size, - of the highest quality and specification, - in the best location in each market. TE AS R BN REAL ESTATE BN AS RE 2013 BNP Paribas Real Estate Disclaimer clause BNP Paribas Real Estate cannot be held responsible if, despite its best efforts, the information contained in the present report turns out to be inaccurate or incomplete. This report is released by BNP Paribas Real Estate and the information in it is dedicated to the exclusive use of its clients. The report and the information contained in it may not be copied or reproduced without prior permission from BNP Paribas Real Estate. Should you no longer wish to receive this report, or wish to modify the conditions of reception of this report, please send an to: unsubscribe.mailing@bnpparibas.com BNP P 6 E BN AS REAL EST ARIBAS REAL ESTATE BN BN A BAS REAL ESTATE BN BN AS REAL ESTATE AS REA BN

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