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The Festival of Hospitality, London (03.24)


Philip attended The Festival of Hospitality’s (‘Festival’) final event and panel discussion, entitled “The Investment Triangle”, and brough back the following take-away nuggets:


  • The deal that takes too long will never happen.
  • In 2023, total deal volume in Europe was estimated to be around €12bn. Already in the first two months of 2024, circa €3bn of deals have been concluded. If this is extrapolated to a full 12 months, 2024 could see around €18bn worth of hotel deals across Europe.
  • Not much transaction pipeline at the moment and buyers are quiet. Why? Cap rates not appropriate for sellers, they are waiting for rates to move and their assets are trading well anyway, for now. Thus, no urgency.
  • Refinancing has been the busy bee in the absence of transactions.
  • BT Tower considered to be a one-off and there was scepticism as to its viability.
  • Shelborne in Dublin sold for circa 7%, when pre-C19 it could have been closer to 5% (confirming our own yield trends in the latest EMEA Hotels Monitor).
  • Hilton London Metropole may have doubled its NOI since acquisition a few years ago, thanks to a major refurb and post-C19 related ADR recoveries.
  • Hotels often more valuable and sellable if sold with Vacant Possession.
  • PE Houses still have IRR expectations in the 20-30% range (net of fees) and still want control of operations. Hedge Funds target a higher IRR and Pension Funds lower (with lower risk appetite and longer money profiles).
  • Hotel designers should be willing to change their designs to help investors reach their target Capex budgets. Trophy projects could carry a higher design ethos.
  • Lots of pent-up capital because of the low deal volumes in recent years but remains restricted by possible returns. That said, there is pressure from within to spend as the alternative is to return capital to investors, which does not look good and tarnishes reputations.
  • Bank enforcements later in 2024 may help unlock deal flow. Finance costs remain stubbornly high, thus at refinance (of which there is a lot of backed-up refinance activity to come after many years of extensions) either more equity will be required, or owners will have to take more expensive debt (most likely from alternative debt platforms at eye-watering rates).
  • Forced sales still uncertain, so future deal volumes uncertain. Lower interest rates would help to structure financial engineering and perhaps stall distressed activity, or it could facilitate deal flow. Which will it be? Watch this space.
  • How much do brands cost? For an owner’s hotel operation, at least 10% of turnover will be paid away to an operator/brand. Not all hotels require a brand, so think carefully, property-by-property. If an owner decides to not brand and to rely on OTAs, the latter can ultimately cost as much as a brand in fees (however, the PIP will be a lot less, so swings and roundabouts from an IRR perspective, and to be considered property-by-property).
  • If you are good and have some luck, some hotels become brands in of themselves and may even proliferate. The Pigs achieve a very high proportion of direct business, rarely use OTAs and have no brand fees!


Many thanks to the organisers (Always Thinking) for putting together such an interesting panel and for allowing it free reign to explore such a wide range of topics. The show could have gone on for hours, it was that interesting.

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