Amsterdam tops London as most attractive destination for hotel investment

London has been replaced by Amsterdam as Europe’s most attractive hotel investment destination, according to new research from Deloitte.

The annual survey of more than 100 senior hospitality figures also found Chinese and North American investors are expected to dominate the European hotel investment market in 2017.

Some 62% of respondents to the survey said they see China as the biggest source of inbound investments into Europe, up from 51% last year, while North America followed with 46%.

More than a third (34%) ranked Amsterdam in the top spot for hotel investment, followed by London (32%) which had previously held the top spot for the last two years. Barcelona (28%) and Dublin (24%) followed, with Berlin and Madrid (18%) joint fifth.

Following 2015’s bumper year for mergers and acquisitions in the sector, Deloitte said deal flow in 2016 has been more subdued. Nevertheless, hotel executives are optimistic about the investment opportunities that lie ahead, with more than a third (34%) believing that the European investment cycle is 12-18 months away from peaking.

Close to 60% of respondents see disposals and consolidation as prominent investment themes in the next year.

More than half (52%) of hotel investors cited geopolitical instability in Europe as their number one concern for 2017, followed by deflation and lack of economic growth on the continent (47%).

Significantly, only a quarter were worried about the UK’s decision to leave the European Union, with the various European elections scheduled for 2017 generating greater unease (37%).

With these concerns in mind, one-third of respondents cited the budget segment of the market as being the most attractive for investment in 2017, followed by the upscale (24%) and midscale (20%) segments.  

Meanwhile, resilience has also been seen in the regions with industry leaders naming Edinburgh (47%) the most attractive hotel investment destination in the UK outside of London, with respondents believing it is now as attractive to investors as the likes of Rome and Lisbon.

The Scottish capital was closely followed by Manchester (46%, up from 40% last year) and a resurgent Birmingham (22%, up from 9%).

Ikola Reid, director in Deloitte’s hospitality advisory team, said: “In the regions…trading is up as the UK becomes a more affordable and accessible place to visit for overseas tourists.

“Furthermore, despite initial uncertainty in the immediate aftermath of the Brexit vote, we have recently seen a rejuvenation of interest from foreign capital driven by their appetite for income and the opportunity to capitalise on sterling’s depreciation.”

Slowing economic growth (66%) and increased employee costs (52%), are the principal concerns in the UK’s regions, followed by the fallout from Brexit (42%). Two-thirds (64%) of respondents believe that owners will focus on improving profitability as part of a 2017 strategy.

Despite these concerns, half of industry leaders expect regional UK  revenue per available room (RevPAR) growth to be between 3-5% in 2017, and more than a third of respondents (38%) expect to see multiples of 10x, with 20% expecting pricing to be higher at 12x or more.