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Hotel sweet hotel
16 December, Milano Finanza
While the office segment gets all the attention nowadays in real estate, representing the main driver of the sector, there is a segment that is not very often mentioned, but that may grow and represent one of the main drivers in the future. It’s indeed the hotel segment. “There has always been a lot of attention for this segment, especially in the recent years”, explains Francesco Calia, Head of Hotels for Cbre Italia. Needless to say, in a country known for its beauties and for which tourism in one of the main industries, the offer in terms of quantity and the quality of hotels is vast. “Tourism is a sector in recovery”, explains Calia, “consequently, the number of hotels has grown”. Therefore, hospitality represents an interesting asset class for investors, they’re a status for privates and they’re a good way to diversify a portfolio for funds.
The result is a strong interest in the sector. “Some markets, such as those of Venice and Florence, have already surpassed the 2007 levels, considered the best year before the start of the recession. Rome has already reached those numbers and Milan is very close”, says Calia. For trophy assets, returns are set around 4.5 and 4.75%, aligned with those of offices. That’s why it’s seen as a good investment for who wants to diversify. Moreover, the main marketplaces are solid and in some others, like Milan, there is a surplus of supply for offices, therefore hospitality becomes a valid alternative. Given such a context, it’s easy to assume that we’ll soon see a boom in sales in the next years. Despite this, the growth might be more contained. “There is a demand for such assets and it’s high, but the owners of hotels are often families that have been managing them for generations. Hence, when they put the hotels for sales, the price reflects more a sentimental value than an actual market value”, explains Calia. He adds, that in Italy “only 10% of the hotels are managed by international hotel chains, 90% is family run and local”. As a result, the expected consolidation proceeds extremely slowly: the demand is disproportionate and is never met by the supply. The trend may change with the divestiture of real estate NPLs. “We’ve started seeing just now significant volumes of non-performing loans, but often such portfolios generally contain properties of low quality or with very complicated histories behind, like incomplete hotels, stuck due to legal and environmental reasons. There are really few interesting assets”. We must also consider that investors are not focused on asset trophies. “Some types of hotels can be interesting if well positioned and well priced, four-star business hotels or small boutique hotels”. Nevertheless, the sector will close the year with a positive trend. “In 2009, one of the lowest points, investments in the sectors were around 300 million, while 2016 ended with 1.2 billion, and 2017 too will surpass the threshold of one billion”. Figures look positive, but they don’t reflect the potential of Italy. “In Spain, the volumes are around 3 billion, Germany is set around 5 billion. After all, the quota of hotels managed by big international hotel chains in Italy id 10%, in France, Spain, and Gerani is around 40%, and in the United Kingdom is 60%”.
In Italy, the segment is very fragmented, with a limited growth. “The situation of tourist operators is more dynamic”, explains Calia. “Some new brands are entering the market”. The first to come to mind is Waldorf-Astoria, that was about to open in Milan in Piazza Cordusio, in the property bought by Fosun, but whose negotiation are stuck at the moment. “There are also other chains such as Citizen, with a less exclusive offer, more focused on three-stars hotels, with a younger target, smaller rooms, comfortable common areas, a broad presence of social networks, bars where to meet up and other meeting places. The company is evaluating operations in Rome and Florence”, says Calia. “But it’s not the only example. In the next years, the presence of operators like 25Hours will grow, which is supposed to open in Florence in 2020”. Besides, continue the manager of Cbre Italia, “there are traditional hotel chains that are developing new brands related to some market niches: Curio e Canopy by Hilton, Kimpton by Intercontinental or Centric by Hyatt”, aiming at a target aged between 20 and 40, visiting cities not only for business and open to meeting new people. In conclusion, if sales are growing but not taking off, says Calia, “the operators market will be more active in the future”.
Source: Milano Finanza
Transaltor: Cristina Ambrosi