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Hospitality sector remains robust despite ongoing European economic turmoil

17th Nov 2011 - 00:00
Abstract
Confidence within the hospitality sector has remained robust in 2011, according to a survey of senior hospitality industry figures conducted by Deloitte.
Despite economic turmoil, just over half (51%) of the respondents say current trading is better than expected, whilst 17% say it's unchanged. Just 12% say trading is worse than expected. Speaking at the 23rd Deloitte European Hotel Investment Conference in London yesterday, Nick van Marken, global head – advisory, travel, hospitality & leisure at Deloitte, said: "The majority of major European cities have seen improved year-to-date (YTD) performance, albeit many are still lagging behind their peak levels – particularly in southern Europe. "London has had a spectacular year so far, with revPAR (YTD) 11% higher than 2010 and 13% ahead of the previous peak, reflecting the importance of the city as a true global gateway and one of a triumvirate of unique global hotel markets along with Paris and New York. Looking ahead, the rate of growth is expected to moderate somewhat." The majority of respondents (58%) anticipate UK regional hotel performance will remain flat in 2012. Investment sentiment continues to favour luxury hotels in prime gateways. Significant investment in the refurbishment, re-positioning and acquisition of luxury hotels has been seen since the start of the financial crisis in 2008, demonstrating the resilience of markets where barriers to entry remain high and investment capital is seeking opportunities. van Marken added: "Despite ongoing economic uncertainty, global hotel transactions in the first half of 2011 were over double the same period in 2010. In Europe, as predicted at last year's conference, we have also seen an increase in portfolio deals. Funding continues to be a challenge as lenders focus on reducing their balance sheet risk. Cash-rich investors have been the main beneficiaries of this credit squeeze and several all-equity deals have been seen. "This sentiment is echoed by survey respondents, who believe bank funding is still not readily available. In their view, the most active investors in the next five years will be high net-worth individuals (HNWIs) and sovereign wealth fund (SWFs) who are by definition cash-rich." When it comes to locations of future hotel development, the UK (with 46% of votes), was the most popular choice amongst the big five European markets (UK, France, Germany, Italy and Spain) followed by Germany (30%) and France (16%). van Marken closed by adding: "The outlook remains clouded by uncertainty, with the situation in the Eurozone only adding to the feeling of unease. Corporates in particular are sitting on significant cash but remain reluctant to invest in this environment. We all need confidence to make investment decisions and that continues to be in short supply. Hoteliers, of course, remain eternally optimistic."
Written by
PSC Team