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HAF "There have been fewer sales and the problem is not the buyers but the sellers"

Valerie Schuermans, Vice President Business Development Western and Central Europe at Radisson Hotel Group, and Philippe Bijaoui, Managing Director France at Christie & Co, discussed at the Hospitality Asset Forum the latest hotel investment trends, investor profiles and brand launches in the post-Covid world.

Are there any figures you wanted to share with us this morning?

Philippe Bijaoui: We specialise in hospitality real estate, with 140 hotels sold in 2021 and 4,000 hotels for sale throughout the European region. We are also advisors and consultants. We have a good vision of what is happening in the market, but today I am going to avoid making forecasts because if we look at 2021, during the same forum, all kinds of forecasts were made and nothing happened as expected, for example recovery in 2023, 2024, etc. And then we said all sorts of things about our activity a year ago and finally nothing happened as expected. That's the beauty of our business. 

To start with, let's talk about macro figures, especially GDP in Europe. Look at the decline in 2020, followed by a small recovery in 2022 and then the arrival of inflation. Whereas it has been rather stable for the last 10 years or so, it's suddenly rising sharply. Something else that is interesting is the average daily rate and RevPAR.

We see more or less the same trends between Europe and France. With results higher than those obtained in 2019. We couldn't see this before. We said in 2020 that the recovery would be in 2023/2024, but we see that the recovery has taken place in 2022. Let's look at what didn't happen with the transactions. Many of the transaction volumes for 2019 never came back. There was a small rebound in 2021, but they never came back to the level of 2019. In 2022, the first quarter was quite good and then the figures to date show us a spread out situation when we look at transactions and investments in our hotels.

There are of course a lot of uncertainties in real estate, including inflation, interest rates and energy costs. There have been fewer sales and the problem is not the buyers but the sellers. There are not enough sellers, yet the appetite has not decreased. It's a paradox! There are a lot of headwinds, bad news. Even when hotels were empty, closed in Paris, every day people called me and asked if there was a hotel for sale in the capital. As you can see, the appetite for hotel real estate remains high, while the number of hotels for sale is still low.

On the Radisson side, what would you have to say about these 36 months and the opportunities?

Valerie Schuermans: In terms of finding opportunities, we have been very lucky. At the beginning of the pandemic, we signed 150 deals. We had record years in terms of signings. But we also see this trend.

This trend in geography, this change in products, and we had to adapt to achieve these results. When we look at the changes in geography, we see that we are focusing on those regions that have been less impacted by the restrictions. Where markets had had strong demand or markets that had had very balanced demand when it came to individual demand.

On the product side, we saw that there was a stronger appetite for the higher end markets, the smaller hotels. We also saw the resorts that were more dominant, more important. To respond to these changes as an operating company, we had to adjust because from a transactional point of view and from an investor cycle point of view, we saw this change and it was reflected in the numbers as we can see here with the RevPAR.

Radisson's response to this change in climate has been through the launch of soft brands like Radisson Individuals. We had very clear communication with investors, developers and the service department. We made sure that we had a cost effective conversion package for all our brands. To combine these four aspects, we were lucky because we were able to continue our development strategy in Europe.

Have you seen other types of investors who have invested in the hotel industry?

Philippe Bijaoui: Yes, there are all kinds of new investors, but they are mostly the same as usual. In a way, this is reassuring. Because those who have large portfolios, what they want to do above all is to consolidate them. And the others who have just entered the sector recently, what they want to do is gain market share and efficiency is important to them.

Flexibility is essential, given the product they were looking for. But also efficiency when they have to rebuild real estate clusters in a particular area. We were all on a diet during Covid, now everyone has lost a little bit of weight. And so now we can deal with all those headwinds and clouds that I mentioned earlier (interest rates, energy costs).

Have you started to look at new investments, ways to buy assets in the hotel industry? Are you reassuring the banks in the long term? Do they trust you in these areas?

Philippe Bijaoui: Our clients, the buyers, have long-standing relationships with their bankers. I'm not talking about large assets, we focus more on mid-markets, on regional properties. And the bankers follow them. So far, there hasn't been a deal that has stalled, that has been rejected because there was no credit line, no financing.

Interest rates have gone up, people have to adapt, loan to value has changed, the way of managing debt has changed, loans in relation to interest rates have changed but have not pulled the curtain and the financing lines are available for the middle regional market, which is the biggest market in France.

Valerie Schuermans: In order to address some of the issues that are becoming very important, we had to focus on sustainability. Especially in our leasing contracts because we have all kinds of contracts and in the leases. We are really focusing on sustainability so that there is more comfort with the investor market for bank financing and making sure that the taxonomy rules are followed. That's really key. We had to make sure that we met these different approaches when it came to creating operational value to have a long-term vision for the operations.

Do you have a new product you wanted to share with us?

Valerie Schuermans: Yes, there was a product change. We wanted to go into conversion, so we launched Radisson Individuals in 2020. We did this not to focus on new builds but to cater for independent hotel operators. Radisson Individuals has been signed in France, in Bordeaux and Paris, and the properties will open next year.

We are pleased to announce that we are coming to Honfleur with the conversion of La Maison de Léa, which will be part of this system in the fourth quarter of next year. It's a very nice property with 46 rooms next to Honfleur. It's not just about the architecture of the brand, we have gone through standards of transformation as a group. We're going to continue to invest, we've made a lot of investment in our IT infrastructure and we're here to accommodate these new needs in the investment market. 

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