Capital from across Asia targets European hotels

The decline of Chinese investments in the hotel sector in Europe will be more than compensated for by the increase in interest from other Asian investors, European institutions and US private equity firms, delegates heard at the Hotel Investment Conference Europe (Hot.E).

‘We are not seeing capital from China anymore because of restrictions on foreign investments, but Asia has certainly not gone quiet,’ Steffen Robert Doyle, co-head of the real estate group at Credit Suisse. ‘In countries like Japan, Korea, Singapore and Malaysia there is a lot of money and a huge interest in investing in Europe.'

Doyle was one of the speakers at the Hot.E conference held at the Hilton London Bankside hotel (pictured) on 26-27 September. 

Asian investors are not only more interested in Europe but also more open about opportunities, said David Ling, head of strategic development at CDL Hospitality Trust, a Singapore-based real estate investment trust.

'We are very open minded now,' Ling said. ‘We will look at Tier1 but also Tier2. We are no longer limited to certain countries but we are willing to look at Eastern Europe and Southern Europe. We want good returns and we believe it is important to diversify and be able to play one market against the other.'

Asian investors find themselves competing with other sources of capital, such as private equity firms with increasingly large funds and institutional investors who are allocating more and more resources to real estate.

'What is really significant is institutional investors’ massive shift into real estate in general and hotels in particular,’ said Jean-Philippe Chomette, founder and chief investment officer of Algonquin, a private equity firm that invests in European hotels. ‘This reallocation will outweigh any tapering off Chinese investments and it will have a huge impact on our sector.'

One example is the Norwegian sovereign wealth fund, he said, that is now going to invest 7% to 10% of its capital into real estate. It will be a major shift. The fund, which was already the biggest in the world, has gained over €100 bn in the last year and is now worth over $1 tln.

Investors are waking up to the recovery of the Eurozone, experts agreed, and for most their first port of call will be the main tourist destinations and business hubs.

‘We only look at gateway cities,’ said Erik Jacobs, partner at Horeca Investment Partners (HIP). 'We are in Paris already and we are looking at Dublin, Amsterdam, Madrid and Barcelona, with a long-term view. If you are not in a hurry to repatriate capital then you can afford to wait,' Jacobs said. HIP is an investment platform exclusively representing a family conglomerate based in Asia.

When investing in hotels it is important to choose markets that are varied, said Ling: 'We like cities that do not rely just on one type of tourism. Frankfurt, for example, is a strong corporate market but it is empty at weekends. London or Amsterdam are perfect, because they combine all markets in all seasons.'


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