THE PIPELINE : EUROPE
product , aiming to make it a more efficient and cost-effective option for regional developers . The prototype is based on a 170-key , six-story hotel situated on a 62,807-sq-ft ( 5,835-sq-m ) site , with a flexible design . But even as Marriott attempts to make new-build projects more attractive , Ervin says conversions will continue to be the primary growth model for the foreseeable future .
Golden Tulip Lyon Millenaire is located in Saint-Priest , France .
Consolidation theme Look for consolidation of regional chains into larger international groups to continue . With Europe ’ s hotel inventory still mostly unflagged , white-label branding initiatives , such as Marriott ’ s Autograph Collection , are attractive to hoteliers seeking to maintain independence while benefitting from powerful marketing and reservations systems .
Overall , though , the trend across Europe remains away from independent status . In the Netherlands , for example , the ratio of branded hotels has nearly doubled since 2001 , jumping from 35 % to 61 %, according to Horwath HTL .
Co-branding arrangements , such as the one Marriott struck with AC Hoteles , Madrid , are an avenue more midsized regional operators are considering . Marriott and AC plan to take their AC by Marriott co-brand into markets beyond the Iberian Peninsula starting in 2013 , with projects in the pipeline in France , Russia and Turkey .
Meanwhile , Hilton — fresh off reflagging eight Mint Hotels under its DoubleTree by Hilton and Hilton Garden Inn brands as part of parent company Blackstone Group ’ s acquisition of the London-based group — is looking for additional regional players to absorb into its Europe portfolio . “ There will be opportunities to rebrand some of the large regional chains of hotels — it ’ s very difficult to predict exactly which ones and where — but there will be opportunities over the next 12 to 18 months ,” Fitzgibbon says . A co-branding arrangement along the lines of Marriott and AC , however , is not in Hilton ’ s plans .
Accor added 49 properties last year through the acquisition of the Citéa extended-stay hotel group , which were rolled into the Adagio brand .
Poking around gateways The transaction market in Europe going forward will be driven by an expected flood of assets with financing stress resulting from maturation of five-year debt terms that were arranged in the early days of the downturn . Jones Lang LaSalle Hotels , which anticipates global hotel transactions to remain flat at about US $ 30 billion this year , reports that previously slow trading activity in Central and Eastern Europe is picking up , notably in Poland .
Nevertheless , hotel investors are focusing mostly on the gateways of Western Europe , where asset prices
“ THERE HAVE BEEN DISCUSSIONS ON WHETHER THE EUROPEAN LUXURY HOTEL MARKET IS DEAD — we don ’ t think so . We have just signed a new Ritz-Carlton in Vienna and a Bulgari in London , and intend to develop more luxury hotels throughout Europe .”
– Carlton Ervin , Marriott International generally remain high . “ We think that when and if the banks are ready to eventually clean their balance sheet in the south of Europe , we may also see many more opportunities of acquisitions of distressed hotels ,” Karaoglanian says . Portfolio deals will be more typical in the United Kingdom and Ireland in 2012 , JLLH predicts .
Overall , Europe ’ s transaction market is sluggish due to the economic context , the low appetite of the banks to take risks and an ongoing pricing gap between sellers and buyers . The flipside is that the lingering economic crisis , combined with a maturing sophistication of the European hotel industry , have made more investors interested in hotel real estate as an identified asset class . “ This translates in various manners , with U . S . investors now targeting European hotels , but also more European funds interested in the attractive yields of hotels compared to residential , office or even retail ,” Karaoglanian says .
Invesco is among the more active hotel buyers in the Eurozone , having spent about € 500 million ( US $ 647 million ) to acquire 17 upscale branded hotels since late 2010 . The upscale segment is Invesco ’ s preferred acquisition target in Europe , Socker says , because its exposure from high fixed costs is far less than the luxury segment in this difficult economy . Meanwhile , upscale assets tend to hold their value better than their downscale counterparts , he says . Ultimately , attractive acquisition opportunities are out there , despite some disconcerting near-term fundamentals , Socker says . “ If you have the equity and you can be a cash buyer ,” he notes , “ there are actually incredible opportunities .”
34 HOTELS March 2012 www . hotelsmag . com