Private investors discover hotel investments in Austria

“Austria’s hotel investment market is and will remain active.” So says Lukas Hochedlinger, Managing Director Austria for hotel property specialists Christie+Co, with firm conviction. Last year, commercial property worth a total of 1.65 billion euros was sold in Austria and about a third of all transactions were attributable to the hotel segment of the market. “In the second half of the year especially, there was a lot of activity,” said Hochedlinger. Altogether something over 400 million euros was invested in hotel property.

Compared to the overall number of businesses in the accommodation sector, These transactions represented only a very small proportion. In Austria, there are something over 13.000 lodging establishments with just over 400 of these in Vienna itself. “With around 1.3 million beds in Austria, the transaction volume is down around the tenth-of-one percent level.,” said Martin Schaffer, head of Vienna hotel property consultants, MRP hotels.

Nonetheless, the hotel property segment is increasingly coming into the sight of private Investors. “The phenomenon of capital flight into ‘concrete gold’ does not exclude hotels,” says Hochedlinger. Many of the currently active investors in Europe are the so-called ‘high-net-worth-individuals’, that’s to say private investors with access to their own capital reserves. “These investors are not dependent on raising long-term bank finance and so are able to react much faster.” While institutional investors are, to some extent, under pressure to invest, for them it’s often not such an easy matter to find the right kind of property.

“Such investors require a certain minimum scale, combined with a good, long-term rental contract as well as, in the ideal case, a completely new building,” says Hochedlinger. Thus, from an international perspective, the Austrian hotel investment market is only of limited interest. For many investors, the Austrian market is simply too small, believes Hochedlinger. As a result, the majority of investors last year were themselves from Austria. However, Christie+Co has identified additional growing interest among eastern European investors. This accounts, for example, for how the Austria Trend Hotel Doppio and the Hotel Steigenberger Kaprun all came to acquire new owners of Russian origin. Similarly, investors from Ukraine were involved in the sale of the Hotel Panhans in Semmering.

In Salzburg and the Tyrol as well, more and more small- and medium- size establishments are being sold to foreign investors, often coming to the attention of the media and market observers. “But there is no question of a complete sell off of the domestically-owned hotel business; it remains the case these are well-known exceptions,” says Michael Regner, a partner with MRP hotels, who was speaking on the margin of the Austrian Hotel Association’s annual conference.

New properties are busily being opened this year: Kohl & Partner estimate there will be 2,200 new hotel rooms in all categories. Among the most prominent new openings to be added this year to the ranks of new Viennese five-star Hotels, are the Kempinski in the Palais Hansen as well as the luxury hotel, The Guesthouse. Also not to be under-estimated is the capacity provided by 10 further openings which fall into the three-star or mid-scale segment. A shadow over this is cast by Vienna’s new Central Station. The first trains have only been running since last December, but already three new hotels are opening their doors. By 2014, more than 2,000 new rooms will become available at Central Station alone.

MRP hotels believe there will be continuing demand from tourists over the next few years. Vienna will therefore need more and more extra hotel beds in all segments, says Martin Schaffer, ist joint head of the business. “This will almost certainly mean that old establishments with a less professional business structure and obsolete buildings will get left behind.” Despite the strong current growth in capacity, Kohl & Partner also see the potential for new projects. Niche products, especially in the lifestyle- and designer-oriented segment, regardless of category, as well as international hotel brands that don’t yet have a presence in Vienna, could contribute to the attraction of the location.

On the investment side, the current year should also remain exciting. “I do not expect this year to see the sort of huge 120-million-euro deals, such as the Ritz Carlton last year, but I still see several really quite large transactions,” says Hochedlinger. “The market remains active and several interesting hotels are, or son will be, coming onto the market. In my view, that suggests that 2013 will be a good year in the hotel property market.”

 

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