Hotel Investment Market Austria: After a significant decrease of transactions caused by Covid-19 in H1 2020, more activity could follow in the second half of the year
Vienna. As expected, the volume of hotel transactions in the first half of 2020 had declined significantly due to the effects of Covid-19 on the hotel industry and the real estate sector. After a record year in 2019, with a transaction volume of around EUR 1.25 billion, the second quarter of 2020 was marked by stagnation. This could already change in the second half of the year, forecasts hotel real estate expert Christie & Co.
Economic challenges triggered by Covid-19 have brought uncertainty into the tourism sector in particular, as well as to many investors. “With some very exciting transactions at the end of 2019, we expected a similarly positive trend in 2020, as there were some interesting hotel properties, developments and portfolios on the market, especially at the beginning of the year,” explains Simon Kronberger, Director Austria & CEE at real estate specialist Christie & Co.
But the official requirements imposed by Covid-19, which are particularly severe for the tourism sector, such as border closures, exit and travel restrictions and plant closures, have increasingly unsettled investors from the start of the lockdown in mid-March. After a handful of transactions in January and February with a total volume of just over 60 million euros, the market was paralysed.
“Larger transactions in urban areas, some of which had already been finally negotiated, were cancelled at short notice or postponed to the second half of the year due to the pandemic. As a result, there have been no noteworthy hotel transactions in Austria in recent months,” comments Kronberger on the current situation. “Due to the slow return to normality, above all through domestic tourism and the opening of the borders to the most important feeder market Germany, there are signs of a relaxation in the market for the summer season in the holiday regions, which also influence possible investors. Slowly, tourism and also hotel investors are awakening from their rigidity,” adds Lukas Hochedlinger, Managing Director Central & Northern Europe at Christie & Co.
And indeed, the current situation may also have positive effects on the investment hotel product. On the one hand, there are signs of adjustment in the market that are counteracting the massive dynamics of recent years and forcing companies that are no longer up to date or in line with the market to act, for example by repositioning or renovating. On the other hand, it is evident that well-positioned holiday hotels will recover faster than city hotels. Thus, under certain circumstances, holiday hotels may also become increasingly important as an investment product and at least partially fill the significant gap to the city hotel industry. “It is also apparent that most professional investors will continue to hold on to their hotel asset as an addition to portfolios in the long term and that well-secured hotel products with sustainable contracts and operators with a good credit rating will continue to be in demand. These hotels will stand out even more clearly from the overall transaction market in the medium term and will experience virtually unchanged strong demand in the long term,” Hochedlinger is certain.
Together with other market participants, Christie & Co is currently preparing the first “Post-Covid-19” processes and is again offering several hotel properties with long-term potential for sale. “Together with the resumption of the paused processes, some of which were nearing completion, we expect a more transaction-rich second half of 2020. Thus, the transaction volume in 2020 will certainly be below average, but with a strong second half of the year at least conciliatory for the real estate industry,” Kronberger concludes.
Christie & Co has adapted its portfolio of services for hotel properties in response to the Covid-19 pandemic to ideally support operators, owners, investors and banks in their discussions with stakeholders and the resumption of business.
You can find more information in our recovery brochure.