London remains ‘best in Europe’ for hotel investors

London has been voted the most ‘attractive’ hotel investment destination in Europe for the second year running. A survey of senior hospitality figures from business advisory firm Deloitte found almost a third (31%) of respondents ranked the UK’s capital as the number-one hotel investment destination in Europe. This came despite over half of the respondents (57%) regarding the city as ‘overvalued’. It came ahead of joint-second Barcelona and Madrid (27%), which were followed by Amsterdam (26%). Paris slipped to fifth place after being ranked second last year. Nick van Marken, global head of hospitality at Deloitte, said: “Although some investors see the city as overvalued, London’s position as a proven destination for both business and leisure remains unparalleled. Investor appetite and its added status as a safe haven means we expect capital flows to remain strong.” China and North America were viewed as the primary source of investment in Europe over the next 12 months, largely driven by a weaker euro, attractive yields, favourable interest rates and economic recovery. Despite the optimism, senior hospitality figures also highlighted several risks facing the industry in 2016. More than half (54%) identified geopolitical instability in parts of Europe as a key risk, with the same proportion concerned by the threat of deflation and sluggish economic growth on the continent. A third (34%) feel the slowing Chinese economy is a concern. More than half (54%) believed that the European hotel industry is less than 18 months away from reaching the peak of the current investment cycle, which could indicate a changing investment landscape for 2017 and beyond. Outside London, Scottish cities ranked in two out of the top three regional UK investment destinations. For the second year in succession, respondents named Edinburgh (47%) as the most attractive investment destination in the regions, followed by a resurgent Manchester (40%) and Glasgow (23%). Two-thirds (64%) of industry leaders expect regional revenue per available room (RevPAR) to grow in the region of 3 to 5% in 2016. The survey also found that recently arrived UK hotel investors are expected to focus on rebranding and repositioning (55%). Meanwhile, the rise in labour costs is also expected to be an issue or regional UK hoteliers in the next 12 months (53%). New hotel supply (42%) and the possibility of an interest rate rise (33%) were also cited as potential threats to the UK regional market.