Hotel acquisitions and development in Europe’s top cities essential for survival in 2015: report

If you’re not dining, you’re dinner. That's the key hotel theme of 2015, according to a new report, which foresees voracious acquisitions as essential to survival in the sector.

Consolidation among major hotel companies will be paramount, says global hotel consultancy HVS, as large groups will have to grow or risk being taken over.

“Organic growth is a relatively slow way to expand, so hotel groups will be looking for opportunities to make quantum leaps, by buying other groups and driving more value through economies of scale,” said chair of the consultancy’s London arm, Russell Kett.

“Hotel investors are looking at cities such as Barcelona, Hamburg, and Munich, which HVS has highlighted as development hot-spots,” he said.

“This is where we expect to see an increase in both business and leisure demand and where investors are likely to see a bigger return,” he added. Cities highlighted as currently to be avoided for new development include Athens, Budapest, Kiev, Vienna and Warsaw.

A lack of hotels on the market means that transaction volumes are down on levels experienced in 2005-07. But coupled with demand and profitability, this should mean hotel values continue to rise for the foreseeable future.'

New investors to the sector include insurance companies and hedge funds, but Kett predicts that major transactions this year will be dominated by private equity buyers.