“ Quite a number of investors got their fingers burned because they failed to understand how the hotel market works and how to create value . Passive owners who bought hotel properties at low yields with fixed leases are now realizing it was much riskier than they thought .”
– Anders Nissen
Although he ’ s waiting to shop seriously until the banks take action and he has a better read on how Europe will manage its recovery , Nissen likes the prospects for “ complicated ” deals and portfolios of underperforming assets where a seasoned owner-investor can add value .
Conventional wisdom is betting on deals in major urban centers to fuel the M & A pipeline , but Nissen disagreed . He likes the prospects of deal-making for assets in cities “ that have an ambition to grow as business and leisure destinations .” That would include regional cities such as Manchester , Leeds and Sheffield in the U . K . ( Brexit isn ’ t a near-term hurdle at a time when local travel is a high priority .) Elsewhere , it ’ s growing cities in Germany such as Hanover and destinations throughout the Nordics .
Both van Marken and Nissen are studying southern Europe . “ There ’ s been a bit of a north-side divide on reopening in Europe ,” van Marken says . “ Southern Europe was more exposed to the virus , but I don ’ t think anyone in Spain is thinking , ‘ Offer me half price and I ’ ll take it .’ That ’ s not going to happen .”
One thing ’ s clear : There ’ s no lack of interest . “ Private equity , including some of the big U . S . firms , is salivating at the prospect of what might come across their desks . In the widest possible interpretation , Europe looks like a pretty appealing hunting ground ,” van Marken concludes .
Don ’ t wait until 2021 in asia Asia Pacific will account for 60 % of the projected US $ 2.1 trillion in credit losses in 2020 and 2021 , according to S & P Global Ratings . What does that mean for the hotel market in a region that saw plenty of activity in 2019 ? That particularly includes Japan , which JLL reported was the most active M & A market in the region , and runner-up China . The two countries accounted for 52 % of deals by value in 2019 .
“ It ’ s not going to be a banner year , of course , but it ’ s also not a write-off ,” says Manav Thadani , founder and chairman , Hotelivate , Delhi , India . “ Let ’ s not forget that 2018 and 2019 were record profit years for existing investors , and 2020 was looking good . There is no widespread need to eject from this space for the believers .”
The locations of hot spots on the regional map are a matter of opinion . JLL ’ s recovery guides cited locations dependent on domestic travel , as stronger markets , especially those such as Sanya , China , and Okinawa , Japan , that have
“ Let ’ s not forget that 2018 and 2019 were record profit years for existing investors , and 2020 was looking good . There is no widespread need to eject from this space for the believers .”
– Manav Thadani
not been as heavily hit by the COVID-19 pandemic . JLL anticipated Okinawa to have one of the fastest recovery trajectories among resort areas in the region , and it noted that Sanya is expected to lead the way across Greater China .
The “ who ” has as many different answers as the “ where .” Robert Hecker , managing director , Pacific Asia , Horwath HTL , considers private equity a perennial player in the trophy asset market . Beyond that , he sees most activity coming from one of three scenarios : companies with a portfolio in the hospitality sector that wish to or need to exit ; one-off deals ; and companies used to an opportunistic acquisition strategy pre-COVID that plan to continue .
www . hotelsmag . com • HOTELS ’ Investment Outlook • November / December 2020
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