The optimists want to believe that the fundamentals that supported the exceptional post-Covid rebound are solid enough; the more worried are questioning the deteriorating conditions in terms of geopolitical context, economic instability, operational difficulties, rising costs, and fluctuating interest rates.
All observers of the real estate market recommend directing capital towards hospitality to develop a sector that is far from having reached its maturity and has demonstrated remarkable resilience in post-crisis recovery.
Investors, whether they are institutional or sovereign, family-owned or savings collectors, opportunistic or steady, cautious or more adventurous, are now convinced that hospitality real estate assets carry a good return on investment and a guarantee of appreciation. In their strategy for investing own or raised funds, hotel establishments therefore rank well.
But are all indicators favorable in the medium and long term? Will the opposing forces be strong enough to curb a movement that is still well oriented to this day?
Hotel investment in all its states does not present a uniform face.
Indeed, money is not lacking, but not in all its forms. The recourse to debt is no longer as easy as in the glorious years at the beginning of the century. The abundance of loans had maintained the speculative dimension of hotel investment, which was not necessarily the best trend. What will be the strategies of the central banks to not break the economic recovery? Is the ongoing decrease in interest rates not a misleading incentive to take risks while many countries are entering into recession?
"Recent transactions on hotel assets show an always active market, with some peaks reached for the price per room key, and contribute to enhancing the hotel sector. The dynamics of asset exchanges among owners can only maintain the creation of a new supply to feed the market". Sylvie Bergeret, MRICS, Head of Studies, MKG Consulting
But does the persistent shortage of offers not artificially maintain an unrealistic level of transactions compared to operational revenues?
Because the development of new capacity faces several unfavorable factors: the availability of well-located land; the explosion of construction costs; more demanding regulations in terms of CSR and environmental protection, all maintain the developers' reluctance to take the risk of new creations.
In the pipelines claimed by the main hotel groups, the place for the conversion of already existing establishments, which simply change brand or purpose of use, has never been so large compared to new constructions.
The other characteristic of these pipelines lies in their recomposition between projects. Hotel operations have become more complex due to a glaring lack of labor; due to changes in customer behavior and the pressure exerted by seasonal rentals.
The return on investment (ROI), which remains a fundamental motivation for investors, pushes them in two complementary directions: the high, even very high end, which always displays insolent performances (but for how long?); and new hybrid concepts mixing more activities and targets, relying on new more automated management models (but is this a good direction for our professions?).
Therefore, the subjects of concerns and especially questions are numerous. Simple meteorologists or tornado hunters, we invite you to explore the system of hotel investment in all its states. The forces present, the elements that confront each other, the storms and clearings scrutinized to better understand a landscape that is taking shape before our eyes, hoping to understand the turn it will take.
To be continued
Chapter 1: A Resilient Hotel Market But With Questionable Prospects
Chapter 2: The "Hospitality" Asset Class Favored by Investors
Chapter 3: Is Investment Financing in Jeopardy?
Chapter 4: Barriers to Hotel Investment: Limited Access and Investor Hurdles
Chapter 5: Pipelines Remain Strong but Change Composition
Chapter 6 – Not All Concepts are Equal in Meeting Investor Expectations
