The volume of hotel transactions achieved in the first half of 2017 was more than EUR 700 million with 34 transactions recorded in core CEE markets*. In comparison, 2016 achieved just over EUR 630 million with 20 transactions, in the same period. This represents an 11 percent yearly increase. To compare, the western markets** experienced just 0.3 percent. Cushman & Wakefield predicts the year 2017 to outperform the strong results of 2016.
Unlike last H1, which was not too favourable for Poland experiencing only EUR 4 million total investment volume, this year it is so far the best performing CEE country both in terms of investment volume and number of transactions, accounting for EUR 350 million with 16 transactions.
After Poland, the Czech Republic achieved the second largest investment volume of EUR 165.5 million with six transactions. This represents a slight decrease of 5 percent from H1 in 2016 when the investment volume was approximately EUR 174 million. Despite that, the Czech market saw the largest transaction in CEE, the acquisition of the Marriott Hotel in Prague that sold at the price of approximately EUR 90 million in April 2017.
Hungary had the third best results, accounting for EUR 99.3 million, over three times more than last year during the same period. A sharp decline was recorded in Austria, which decreased in volume by around 80 percent, mostly due to an exceptionally strong 2016 that included the sale of Hilton Vienna and Imperial Vienna. Bulgaria, Romania and Slovakia accounted only for 3.2 percent altogether in terms of transacted volume in the CEE region.
“Increasing interest in the region by both local and international investors was particularly visible in the CEE tourism and hospitality industry, which caught investors’ attention by generating strong income returns,” said David Nath, Head of CEE Hospitality at Cushman & Wakefield. “This has been of great importance in initiating a virtuous circle of investments, which had a positive impact on initial yields in the past few years, particularly in capital cities – such as Budapest, Prague and Warsaw. Regional cities are now starting to benefit from the positive cascade effect and we see interest in these markets growing.”
All key performance parameters including average daily rate (ADR) and revenue per available room (RevPAR) have been steadily growing over the past four years. The reason behind this is the increasing number of tourists choosing CEE destinations for their holiday —especially Prague, which is seen as one of the safest destinations in the Word — and the healthy business demand.
Hence occupancy rates are currently at their peak, reaching 69.2 percent on average in the first half of 2017 up from 66.8 percent in the same period of 2016. As demand soars, the average daily rate also increases, having a positive impact on the bottom line. The average daily rate reached EUR 79.52 up from EUR 75.49 in the first half of 2016. Bulgaria, the Czech Republic, Hungary, and Slovakia achieved double-digit growth and Belgrade was among the top five European markets in terms of RevPAR percentage growth.
It has to be taken into the account that these comparisons compare only the first half of the years 2016 and 2017, which do not yet capture the whole summer and Christmas season. Therefore, numbers like ADR and Occupancy rate are lower than when comparing full years. However, from the comparison of the first halves of years 2016 and 2017, an improvement in performance is already visible.
“The hotel transaction volume in the CEE region has seen stronger growth compared to more established markets in Western Europe partly due to the high income returns. Moreover, the scarcity in development opportunities in more mature CEE markets allows for a further increase in ADR, promising to generate even higher income return for investors in the future” says Frederic Le Fichoux, Head of Hotel Transactions – Continental Europe.
“There is no doubt that so far this year Poland has been the top performing country in the CEE region both in terms of investment volume and number of transactions,” said Maria Zielińska, Senior Hospitality Advisor, Cushman & Wakefield, Poland. “With the hotel industry continuing to perform strongly, generating high income returns, the appetite for hotel investment among both international and local investors is set to grow. The investors are eyeing well-located, internationally-branded hotel products.”
* CEE refers to the Czech Republic, Poland, Austria, Hungary, Slovakia, Bulgaria and Romania
** the term western markets refers to: Portugal, Spain, Germany, France, Italy, Benelux
