Hotel Investment Provides Highest Returns in 2012

Posted on 27 June, 2013 by Kirsten Kennedy

According to the IPD Pan-European Hotel Performance Report released this week, investment in hotels provided the highest return in the commercial property sector last year.

The report shows that the European hotel sector provided a total return of 5.8 per cent in terms of local currency during 2012. This is stronger than the overall European property total, which stands at 4.3 per cent, and significantly outperforms mainstream categories such as shops, offices and industrial property.

Furthermore, when results from the last ten years are collated, hotels also posted the highest returns in terms of investment with 7.2 per cent per annum on average, narrowly beating retail which showed returns of 7.0 per cent.

Marc Socker of Investco believes that investors seeking to achieve a high, and safe, return should consider putting their money into hotels.

He says; “The index provides further evidence that the hotel sector is a very attractive asset class when compared to other real estate asset classes, offering investors a relatively secure and stable income, both in the short term and long term.”

Although the performance of the hotel sector varied greatly across Europe, none of the twelve countries measured posted negative returns in 2012 which, amidst the Eurozone crisis, made this category something of an anomaly. France revealed the strongest results with total returns of 14.6 per cent, while at the bottom of the table Italy pulled its 2011 result of -4.9 per cent up to a positive 0.9 per cent in 2012.

Head of Research at IPD, Peter Hobbs, says; “The hotel sector has shown relatively strong returns over the short and long term, particularly during times where the European market is as weak as it is.

“The steady growth of this sector over the last ten years has shown little volatility, driven perhaps by its tendency towards the fixed leasing structure and therefore the emphasis on income.”

While the situation in certain southern European economies remains somewhat volatile, it is believed that the hotel sector will remain buoyant for the foreseeable future. And with large retailers such as IKEA now looking to invest in hotel developments, it seems that this sector can only grow in popularity.

Do you think the hotel sector will be able to grow indefinitely, or will there come a time when oversupply sparks a contraction?

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