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Bild auf Platzhalter ziehen und Größe anpassen
Hotel Market Report Germany 2021
© Le Méridien Hotel, Hamburg
|
Dear Readers,
The year 2020 brought up challenges for the hospitality industry that has never been present. During the drafting of
this Hotel Market Report Germany 2021, gradual easing of restrictions for Easter are coming up. However, we are
still surrounded by an omnipresent lockdown – discussions regarding different mutations of the coronavirus are
dominating our daily life.
In this year‘s hotel market report, we are not only focusing on facts and figures of 2020. Looking at last year’s
overnight numbers or occupancy figures, a positive interpretation is hardly possible. However, the crisis outlines
which market characteristics might be beneficial for the recovery of a destination.
During crises, leaders and decision makers are wanted. We have interviewed four of them regarding their
experiences with 2020 and asked them for an outlook on the future of hospitality. Briefly, trust is a recurring
keyword. Trust in hospitality as a crucial economic sector with functioning hygiene concepts. Trust in partnerships
between owners and operators. Trust in the strengths of the asset-class hotel. Last: Germany is the homeland of
multiple, unique hoteliers. We may call many of them our clients. The pictures within this year‘s report are showing
concepts of some of our partners from last year.
We wish all our readers many interesting insights!
Andreas Ewald
We stick to it: The world will travel again!
2
|
“2020 will be rememberd as a turning point for the hospitality industry.
The professionalism and innovation power of the industry keeps me optimistic that a fast
recovery in the following months will be possible.“
Andreas Ewald, Managing Director
3
|
Diese Fläche mit einem Bild überlagern
1. Figures – data – facts
European comparison · Leisure hospitality · Transactions
2. Examination of Germany‘s Top 7 cities
KPIs · Market characteristics · Resilience
3. The crisis calls for solidarity
Guest commentary by Marc Werner, Hogan Lovells
4. Hotels are here to stay
Interview with Ascan Kókai, ECE Real Estate Partners
5. Leisure Hospitality – Anchor of stability
Interview with Jens Sroka, Heimathafen Hotels
6. Leonardo and the look ahead
Interview with Yoram Biton, Leonardo Hotels
4
Content overview
© Le Méridien Hotel, Hamburg
|
Bild auf Platzhalter ziehen und Größe anpassen
KPIs · Transactions · Top 7 cities
Figures – Data – Facts
Tortue Design Hotel Hamburg
|
The cards on the hotel market are (re)shuffled
6
The return of the actual value drivers of a hotel property
Location, market, operator and contract – these elements have always been the
key value drivers of a hotel property. Although the industry itself is least
responsible for its predicament, the coming years will see a return to these core
values. The exogenous shock and the market recovery expected for the next few
years clearly show that only hotels with a correspondingly attractive profile will
meet the expectations of investors and banks.
Operators and concepts are amid a structural transformation
The Corona crisis will lead to a structural transformation of the hotel industry,
especially in metropolitan areas. Takeovers of (partial) operating companies
by well-capitalized market players could be already observed in 2020 and are
also expected in the coming months. In parallel, there will be a selection
process in the course of the future market recovery. Target group-specific,
ecological, sustainable and digitally oriented hotel products will benefit first
from returning guests.
Owners will have to adapt to a new distribution of roles in the
medium term
Hotel property owners in Germany were able to benefit from secured cash
flows in recent years, also due to the widespread fixed lease agreements in
this country. The actual recovery of the hotel market as well as the
performance of the operator are now coming to the fore due to hybrid
arrangements, deferral arrangements and repayment mechanisms. A new,
more active role of owners is required.
Investment class hotel - between herd instinct and attractive
buying opportunities
The delta in price expectations between buyers and sellers still exists in Q1
2021. While the financing bottleneck puts equity-strong buyers in the
supposed pole position, portfolio holders are often not yet in the (emergency)
situation of having to accept such price reductions. In addition, the
omnipresent financing bottleneck inhibits the transaction market. Project
developers and owners with expiring mortgages are also impacted by the
reluctance of their financing partners.
|
Tourism in Europe – overnight stays 2020 vs. 2019
7 *Official statistical data for 2020 were not available at the time of report preparation
DACH region shows the strongest resilience in 2020
The analysis of overnight stays in Europe shows that all countries were
significantly affected by the corona crisis. In the countries of the DACH region,
however, declines were less than in many other major European tourism
countries, for example France, Italy, Spain and Croatia.
The main reason for this is Germany’s strong national demand. Germany itself,
as well as the neighboring countries, were able to benefit from international
travel restrictions and the resulting phenomenon “vacation at home / at
neighbors", especially during the summer months. However, the declaration of
extensive lockdowns in many European countries in November 2020, this travel
option has been largely eliminated.
> -61% to -100% No indication* 0 to -40% -40% to -60%
Share of national tourists in selected countries
GER SE NL IT ES AT GR HRV
2019 82% 75% 58% 49% 36% 29% 16% 8%
2020 89% 88% 75% 68% 58% 35% 30% 13%
|
57 55 60 64 69 72 76 80 81 84 88 9032
313 314 320 329 338 340 348 357 366 376 390 406
270
3,4 3,5 3,5 3,5 3,6 3,6 3,6 3,6 3,6 3,63,7
3,8
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
4,5
0
100
200
300
400
500
600
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
63 €
53 €
63 € 63 €66 € 66 €
70 € 71 € 71 € 72 € 73 € 74 €
26 €
43 41
305 307
2,5 2,5
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
4,5
0
100
200
300
400
500
600
2000 2001
Germany 2000-2020 - Overnight stays, beds & RevPAR
8
Volume of overnight stays in 2020 falls below the level of the 2000s at around 300 million
The effects of the Corona crisis on overnight stays are unmistakable. Compared with the previous year, the number of overnight stays in Germany fell by 40% to around
300 million. However, a look at the course of the year also shows how quickly the market can recover. In the vacation months of July to September, overnight stays in
Germany were only around 17% below the figure for 2019. The vacation regions in particular were able to contribute to this encouraging result.
Overn
igh
t sta
ys in
mill
ion
fo
r all
acco
mm
od
atio
n e
sta
blis
hm
en
ts
Beds in lodging establishments Nights nat. RevPAR (Representative data collection since 2008)Nights int.
Source: , Federal Statistical Office | *Data collection criteria have been changed; **2020 also includes closed operations; *** No data due to closures.
*
Bed
s in
millio
n fo
r ho
tel a
cco
mm
od
atio
n e
sta
blis
hm
en
ts
Financial crisis
**
***
Beds Total nights Nights nat. Nights int.
CAGR ‘08-‘19 1,0% 2,7% 2,4% 4,3%
09/11
|
4%
13%
-51%
-96%
-62%
-10%
-2%
8%
21%
9%
-80%
-91%
4%
11%
-63%
-93%
-87%
-73%
-54%-48%
-51%
-65%
-85% -94%-100%
-75%
-50%
-25%
0%
25%
Januar Februar März April Mai Juni Juli August September Oktober November Dezember
Overnight stays in cities and leisure regions year-on-year
Top 7 city destinations and leisure regions showed a sharp divergence in demand trends throughout 2020
The leisure hotel industry in Germany proved its resilience in 2020. Driven by travel restrictions, the top 7 leisure regions were even able to achieve the same or better
overnight stays in the months of July to October compared to the previous year. Since the 2nd lockdown in November 2020, demand in city and leisure hotels is
practically non-existent. Nevertheless, the development in summer 2020 gives hope for 2021.
9 Source: Federal Statistical Offices
Top 7 vacation regions: % change overnight stays 2020 vs. 2019 - Baltic Sea (SH & MV), Allgäu, North Sea (SH & NI), Western Pomerania, Bavarian Forest
Top 7 city destinations: % change in overnight stays 2020 vs. 2019 - Berlin, Hamburg, Frankfurt, Dusseldorf, Cologne, Stuttgart, Munich
Lockdown I Lodging ban & Lockdown II
Top 7 decrease ’20 vs. ’19
Cities -57%
Leisure regions -16%
January February March April May June July August September October November December
|
0,8
1,1 1,2
1,6
3,0
4,4
5,2
4,0 4,0
4,9
2,1
6,3%6,0%
5,8% 5,8%
5,4%
5,0%
4,5%
4,1% 4,0%3,8%
0,0%
1,0%
2,0%
3,0%
4,0%
5,0%
6,0%
7,0%
0,0
1,0
2,0
3,0
4,0
5,0
6,0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
All-Risk Yield Development Individual transactions in EUR billion Portfolio transactions in EUR billion
Hotel transaction volume / prime yields 2010 – 2020
Hotel transaction volume in 2020 declined by around 60% year-on-year
In 2020, the hotel transaction volume reached a level of around EUR 2.0 billion. If the first quarter of 2020 is disregarded, hotel properties worth only EUR 700 million
have changed hands since the first lockdown. The investment market is expected to remain subdued in 2021. The reasons for this are the continuing delta in purchase
price expectations and a challenging financing environment.
10
4,0 – 4,5%*
Ho
tel tr
an
sactio
nvo
lum
ein
EU
R b
illio
nA
ll-Ris
k Y
ield
*Source: Survey Sentiment Report 2020 | 2021 - EVHC
|
Hotel transactions 2020 in a nutshell
The timing of the Corona pandemic is reflected in the hotel transaction market.
Approximately 65% of transactions were completed before the start of the 1st
lockdown in March. Actual post-lockdown hotel transactions were characterized
by sale and leaseback deals or larger mixed-use portfolios in which hotel was the
subordinate component of asset classes.
11
65%
35%
Pre-Lockdown I Jan-Mar
Post-Lockdown I Apr-Dez
11%
7%
10%
32%
39%
A-Cities
B-Cities
C-Cities
D-Cities
Vacation regions
Transaction market shaped by pandemic Further focus on A-locations expected in 2021
Source: Thomas Daily, E&V Research
More than a third of all investments were made in A locations in 2020. It can be
assumed that this share will increase in the future. This was also stated by
investors in the survey for the Sentiment Report Germany 2020 / 2021. A return to
the top locations can be seen as a signal of the increased need for security after
investors were particularly targeting B and C locations in recent years due to a
shortage of products and lack of investment alternatives.
|
0%
1%
2%
3%
4%
5%
6%
7%
8%
20102011201220132014201520162017 201820192020
Shopping Center
Hotel
High Street Retail
Logistics Warehouses
Office (Ø Top-7 Städte)
Hotel transactions 2020 in a nutshell
12 Source: Thomas Daily, E&V Research
Long-term investors remain loyal to the asset class
Activity by professional investors slowed sharply after the 1st lockdown. In
addition to the general market uncertainty, the largely stable price level and the
lack of financing options are two of the main reasons to be named. Opportunistic
real estate investors with a strong equity background also failed to make their
move due to the price delta. On the contrary, equity backed investors succeeded
in acquiring selected operator platforms. Nevertheless, a few investors were able
to secure hotels in highly attractive locations with creditworthy tenants.
The risk premium for hotel assets increases
Real estate corporations/ REITS
Investment/ Asset ManagerInsurances/ Pension funds
Specialized funds
5% Operator
5% Family Office
4% Private
3% Project developer
2% Owner-OperatorFoundations 1%
31%
24%15%
10%
Naturally, the Corona crisis has led to a change in investors' perception of the
asset class hotel. The low investment volume after the 1st lockdown in March last
year also makes it difficult to determine the exact risk premium. Compared to the
previous "crisis winners" residential and logistics, a trend reversal can be seen for
the time being in the heavily affected asset classes hotel and retail. The yield
compression of the years 2010-2019 has stopped, reflecting the impacts for the
hotel industry.
2010 20202012 2014 2016 2018
Cities)
|
Selected hotel transactions in 2020
13
Date Hotel Rooms City Buyer Purchase price
January B&B Hotel Stuttgart Airport/Messe 101 Stuttgart Atream SAS EUR 10 mln
January Essential by Dorint 101 Essen te management GmbH n/a
January GHotel hotel & living 162 Bochum Dr. Peters n/a
January Hampton by Hilton 208 Kiel Bayerische Versorgungskammer n/a
February Lindley Lindenberg Hotel Frankfurt 100 Frankfurt a.M. Art-Invest EUR 21 mln
February Motel One Europa-Allee 25 02/2020 401 Frankfurt a.M. GBI Holding, Bayerische Versorgungskammer EUR 62 mln
February Niu Yen Hotel Nordkanalstraße 46 347 Hamburg Bayerische Versorgungskammer EUR 50 mln
March Dorint Parkhotel 162 Mönchengladbach Helvetic Investment GmbH n/a
April INNSIDE Dresden 180 Dresden EPH European Property Holdings Ltd. EUR 52 mln
April nhow Hotel 304 Berlin EPH European Property Holdings Ltd. n/a
May NH Hotel Erlangen 138 Erlangen Atream SAS, SCPI Atream Hotels EUR 17 mln
August BOLD Hotel Munich Giesing 142 Munich BNP Paribas REIM Germany n/a
August Tui Blue Dorfhotel 08/2020 158 Sylt Land Union Immobilienmanagement GmbH n/a
August Leonardo Royal Alexanderplatz 346 Berlin Art-Invest n/a
August Perlach Plaza 08/2020 172 Munich KGAL GmbH & Co. KG n/a
October Renaissance Hotel Dusseldorf 244 Dusseldorf n/a EUR 58 mln
October IntercityHotel und Adagio Aparthotel 360 Heidelberg Bayerische Versorgungskammer n/a
November Maritim Hotel Kaiserhof 143 Heringsdorf Friedemann Kunz Familienstiftung n/a
Source: Thomas Daily, E&V Research
|
Bild auf Platzhalter ziehen und Größe anpassen
Market characteristics · Resilience
Top 7 city destinations
Nyx Hotel München, © Andreas Rehkopp
|
Key performance indicators 2020 at a glance
15
Cities Overnights ADR Occupancy RevPAR Trans.-Vol.
Berlin12.3 mln
-60%
EUR 85
-15%
29%
-64%
EUR 25
-69%
approx. EUR 400 mln
-27%
Munich6.8 mln
-63%
EUR 96
-26%
25%
-66%
EUR 24
-75%
approx. EUR 250 mln
-58%
Hamburg6.7 mln
-56%
EUR 94
-18%
32%
-59%
EUR 30
- 66%
approx. EUR 160 mln
-11%
Frankfurt a.M. 3.9 mln
-64%
EUR 96
-11%
23%
-67%
EUR 22
-70%
approx. EUR 100 mln
-88%
Cologne2.4 mln
-63%
EUR 95
-20%
29%
-62%
EUR 28
-69%
approx. EUR 50 mln
-86%
Dusseldorf1.8 mln
-62%
EUR 106
-7%
24%
-66%
EUR 25
-68%
approx. EUR 130 mln
-68%
Stuttgart1.6 mln
-61%
EUR 95
-12%
25%
-65%
EUR 24
-69%
approx. EUR 50 mln
-72%
Source: , State Statistical Offices, E&V Research | Utilization also includes closed operations
% deviation represents the development compared to the previous year
|16
Crisis resilience of the top 7 cities in comparison
Methodology of analysis
The analysis aims to create a market profile of the top 7 locations (Berlin, Munich, Hamburg, Frankfurt, Düsseldorf, Cologne, Stuttgart) based on objectively measurable,
historical market data. From this, possible recovery scenarios are to be derived. The analyses focuses on the historical development and performance of the respective
hotel markets, the origin and guest profile as well as the economic strength. Last year's Corona crisis showed that destinations with a strong dependence on international
travel flows, trade fairs and major events are particularly affected by the crisis. In addition, future market recovery must also consider historic sustainability of hotel
markets before the outbreak of the crisis.
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
200%
Share of trade fair tourism in overnight stays ‘19
Significance of trade fair and congress tourism for the demand structure of the respective city metropolis
GDP per inhabitant ‘18
Economic power of a city destination as an important component of tourism demand
Ratio of supply to demand development ‘10-‘19
Assessment of whether increases in supply could be compensated by an increase in demand
Share of overnight stays by national guests ‘19
Dependence of the destination on functioning international travel flows
Bed occupancy ‘19
Derivation of tourist intensity per available bed
RevPAR development 2015-2019
Derivation of which performance hotels were able to achieve in view of the overriding market development
Volatility of demand over the course of the year
Describes the seasonality as well as the dependence on extraordinary events of a city metropolis
The traffic light is intended to represent an assessment of the respective market characteristics and their importance for a market recovery as quickly as possible
Source: , State Statistical Offices, trade fair companies of the respective cities, E&V Research
|
Market characteristics at a glance
17
CityGDP
per capita ‘18Nights/ beds
% change ‘10 - ’19Nights nat. tourists
% share ’19Occupancy (beds)
in % ’19RevPAR
% dev. ‘15 -’19Demand stability
‘19
Share of fair tourists to nights
’19
Top 7 72,917 EUR +54% / +40% 62% 52% +5.9% – 18%
Berlin 40,000 EUR +38% / +31% 55% 53% +11.0% High 7%
Munich 80,000 EUR +64% / +60% 52% 57% -2.8% Medium 14%
Hamburg 65,000 EUR +72% / +59% 75% 58% +4.9% Medium 5%
Frankfurt a.M. 94,000 EUR +78% / +60% 56% 51% -5.5% High 18%
Cologne 60,000 EUR +44% / +18% 65% 53% +12.9% High 27%
Dusseldorf 82,000 EUR +32% / +24% 60% 46% +13.3% Low 29%
Stuttgart 91,000 EUR +51% / +30% 69% 50% +7.5% Medium 29%
|
Diese Fläche mit einem Bild überlagern
18
Berlin
A balanced demand structure may support the recovery phase
Based on a diversified demand strucutre, Berlin has the potential to recover quickly from
the crisis. In comparison to the Top 7 city destinations, the capital showed a very good and
sustainable market performance until 2019. Growth in overnight stays overperformed
growth in supply significantly since 2010. As an international metropolis, Berlin is very much
depending on international guests. The opening of the new airport may help Berlin to
connect even better with international source markets, as soon as travel restrictions will be
abolished.
7% share of nights
Fair guests / nights ’19
EUR 40,105
GDP per inhabitant ‘18
Nights +38% / Beds +31%
Market develop. ‘10-’19
High
Demand stability ’19
55% of all nights
Proportion nat. guests ’19
Berlin Ø Top 7
+11%
RevPAR ‘15-’19
53%
Bed occupancy ’19
|
Diese Fläche mit einem Bild überlagern
19
Munich
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
Waiting for the return of the Oktoberfest
Before the crisis, Munich regularly topped the RevPAR list of Germany’s Top 7 city
destinations, although the development has stagnated in recent years with a slightly negative
trend. In the past, the city benefited above all from strong business travel, trade fair and
event business segments, which are particularly suffering from the crisis. The above-average
economic strength as well as the leisure tourism value should support the market recovery.
Competitive pressure however will affect B-locations (trade fair, airport, outlying districts),
where numerous new openings have been recorded in recent years.
EUR 79,690
GDP per inhabitant ‘18
Nights +64% / Beds +60%
Market develop. ‘10-’19
52% of all nights
Proportion nat. guests ’19
Munich Ø Top 7
57%
Bed occupancy ’19
14% share of nights
Fair guests / nights ’19
Medium
Demand stability ’19
-2.8%
RevPAR ‘15-’19
|
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20
Hamburg
0%
20%
40%
60%
80%
100%
120%
140%
EUR 64,771
GDP per inhabitant ‘18
Nights +72% / Beds +59%
Market develop. ‘10-’19
75% of all nights
Proportion nat. guests ’19
Hamburg Ø Top 7
58%
Bed occupancy ’19
Balanced demand structure harbors hope
The leisure tourism value as well as the high proportion of national guests can favor a rapid
market recovery. In addition, Hamburg acts as a hub or stopover for many holidaymakers
travelling to the Baltic Sea and the North Sea. Corresponding trends were already evident
in the summer of 2020. However, a large number of newly opened beds, the still
pronounced project pipeline and the RevPAR, which was already almost stagnant before
the crisis, remain a challenge for the hotel market in the Hanseatic city.
5% share of nights
Fair guests / nights ’19
Medium
Demand stability ’19
+4.9%
RevPAR ‘15-’19
|
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-100%
-50%
0%
50%
100%
150%
21
Frankfurt
EUR 94,190
GDP per inhabitant ‘18
Nights +78% / Beds +60%
Market develop. ‘10-’19
56% of all nights
Proportion nat. guests ‚19
Frankfurt Ø Top 7
51%
Bed occupancy ’19
Frankfurt is dependent on the recovery of business tourism
The future success of Frankfurt‘s tourism will be based on the recovery of national as well as
international business travelers. Particular attention will be paid to the trade fair and congress
segment. Frankfurt is thus particularly dependent on a rapid economic recovery and the
return to personal exchange and meetings. Prior to the crisis, the hotel performance had
already illustrated the negative effects of weaker trade fair cycles as well as significantly
increasing bed capacities.
18% share of nights
Fair guests / nights ’19
High
Demand stability ’19
-5.5%
RevPAR ‘15-’19
|
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0%
50%
100%
150%
200%
250%
22
Cologne
EUR 59,588 EUR
GDP per inhabitant ‘18
Nights +44% / Beds +18%
Market develop. ‘10-’19
65% of all nights
Proportion nat. guests ’19
Cologne Ø Top 7
53%
Bed occupancy ’19
Healthy hotel market ~ rapid market recovery?
Historically, Cologne showed the most sustainable hotel market development among the
Top 7 city destinations in Germany. Demand development overperformed additional bed
supply significantly. The same applies to the performance at hotel level; which is
significantly above the average of the Top 7 cities. The historical stability speaks for a good
recovery perspective for the vibrant Rhine metropolis.
27% share of nights
Fair guests / nights ’19
High
Demand stability ’19
+12.9%
RevPAR ‘15-’19
|
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23
Dusseldorf
Trade fair city Dusseldorf slowed down for the time being?
In recent years, the Dusseldorf hotel market had adapted to the high volatility of demand due
to the trade fair cycles. The dependence on major events, as well as the continuously
increasing hotel supply, will be a challenge for the rapid recovery of the hotel industry in the
capital of North Rhine-Westphalia.
0%
50%
100%
150%
200%
250%
EUR 81,563
GDP per inhabitant ‘18
Nights +32% / Beds +24%
Market develop. ‘10-’19
60% of all nights
Proportion nat. guests ’19
Dusseldorf Ø Top 7
46%
Bed occupancy ’19
29% share of nights
Fair tourism / Nights ’19
Low
Demand stability ’19
+13.3%
RevPAR ‘15-’19
|
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0%
20%
40%
60%
80%
100%
120%
140%
24
Stuttgart
EUR 90,518
GDP per inhabitant ‘18
Nights +51% / Beds +30%
Market develop. ‘10-’19
69% of all nights
Proportion nat. guests ’19
Stuttgart Ø Top 7
50%
Bed occupancy ’19
High share of domestic guests vs. dependence on business travelers
Stuttgart can rely on an above-average share of national guests. As one of the leading
business locations in Germany with a high share of trade fair tourism, the hotel market will
depend in particular on the overall economic recovery. The dynamic market development of
the Swabian metropolis is reflected in strong growth rates in recent years, also in terms of
hotel performance. The market attractiveness is currently reflected in a well-filled project
pipeline.
29% share of nights
Fair tourism / Nights ’19
Medium
Demand stability ’19
+7.5%
RevPAR ‘15-’19
|
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Guest articles · Interviews
Market opinions
Beach Motel – St. Peter Ording
|
”The crisis calls for investors and operators to close ranks“
Guest article
26
Marc Werner LL.M. | Hogan Lovells
What a year! After dealing with hotels and hotel
operator contracts for over 27 years, my life as a real
estate lawyer has changed completely since March
2020.
While the hotel industry went from one success story
to the other over the last ten years, one project was
chasing the next, and we were able to expand our
team due to many hotel real estate transactions, this
very same team is now working almost day and night
on behalf of the respective asset management teams
to negotiate and formulate addenda for lease
agreements. Thus, in the first months of the
pandemic, we were busy negotiating countless
deferral and (partial) waiver agreements, term
extensions, and postponements of indexations
clauses.
We are still working on these subjects, albeit with
somewhat different preliminary considerations and
justifications in terms of content due to the changes
in the law and case law that have occurred in the
meantime. Since the middle of 2020, we have been
handling more and more acquisitions in the area of
hotel M&A and portfolio transfers of operator
contracts (rental/lease/management contracts).
Therefore, new project developments or the purchase
or sale of hotel assets appeared rather rarely on our
desks in 2020. Fortunately, they still exist and some
of them are very exciting.
In the meantime, we have arrived at the second or
third wave of addenda and operators and investors
are wondering what the future of the contractual
relationship will look like. Particularly because the
legislative changes that have been enacted have not
yet brought the solutions they had hoped for. In fact,
there is now even more uncertainty and confusion.
Deferrals continue to increase the debt burden of
operators and once the exemption conditions under
insolvency law end, it can very quickly lead to
insolvency procedures. The conversion of contracts
to pure turnover-based rental or lease agreements
demanded by many operators cannot and will not
happen as long as regulated funds, which make up
the greatest share of owners of German business
hotels, are the largest investors in Germany. BaFin
(German financial supervision authority) has expressly
clarified once again that hotel investors are not
permitted to conclude pure turnover or profit rental or
lease agreements. It may be in the interest of
investors to allow partial exceptions to this for a
limited period. However, nothing changes in the result
of the fundamental inadmissibility of these contracts
for the stock of regulated investors.
“The conversion of contracts topure turnover-based rental orlease agreements demanded bymany operators cannot and willnot happen as long as regulatedfunds represent the main share ofowners of German businesshotels.”
|
Guest article – Marc Werner
27
In the meantime, the wave of consolidation of hotel
operators has also reached us at a significantly
increased speed: Premier Inn took over a portfolio of
operator contracts, as did Westmont or the HR
Group. Entire operator platforms are for sale and
private equity companies are to be found as buyers.
Only hotel properties are not being sold at a discount
(yet). However, some investors are waiting for
opportunities.
It remains exciting in our industry and the longer the
crisis lasts, the more increases the tenseness of the
parties involved. Solidarity between investors and
operators seems to be the only solution to this crisis.
From our point of view, this has mostly worked well in
recent months. It should be emphasized that there is
no universally valid strategy. Most institutional
investors are highly professional, looking at each
operator and site and define a strategy with their
operating partner on how to proceed.
Even if fixed lease or rental agreements will remain
the standard in Germany in the future, due to Corona,
more and more new clauses are finding their way into
the operating agreement. Of course, so-called
"corona-clauses” are being discussed particularly.
Although there is no such thing as a “standard”
corona clause yet (and probably never will), no new
operating agreement is likely to be concluded today
without a provision relating to "force majeure", which
includes virus pandemics and their legal
consequences.
There is now every form of variety. What is
crystallizing, however, is that investors who are
naturally not overjoyed about these new Corona
clauses, but who are granting operators an
"emergency clause", are demanding that the
regulations on possible rent reductions as a result of
a drop in sales caused by a pandemic must be clear
and unambiguous in terms of the preconditions and
limits on time and scope. An investor must be able to
put a "price tag" on this clause in order to calculate
and thus evaluate the extent of a possible (especially
the maximum) rent reduction. Incidentally, shifts in
risk between landlord and tenant or lessor and lessee
are likely to develop to an increasing extent. What we
have called "hybrid leases" in the past will emerge
even more as a more deliberate allocation of risk
between the parties. I see particularly a shift toward
shorter terms, but also toward obligations of the
operator to establish "crisis reserves" in addition to
the FF&E reserve. It could also be conceivable to
establish a new kind of rent/lease security that covers
the investor's (partial) rent default risk in case of a
pandemic.
Whether there will be new (affordable) insurance
policies for such cases remains to be seen. However,
I am quite sure that we will not see any pure turnover-
based rent or lease agreements even after the crisis.
Not only have they not proven in previous crises,
these kind of contracts are also not bankable or
interesting for German institutional investors.
“The only solution to this crisis issolidarity between investors andoperators. From our point of view,this has mostly worked well inrecent months.“
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Guest article – Marc Werner
28
Interestingly, investors are currently even arguing
against operators from such contracts referring to
Section 313 of the German Civil Code (BGB) for
payment of rent.
I think this is a clever and not at all far-fetched idea.
Overall, we will see how case law will deal with
Section 313 BGB and hotel operating agreements.
Despite the decisions of the Munich Regional Court,
the Dresden Higher Regional Court and the Karlsruhe
Higher Regional Court, the legal situation is still not
certain and remains exciting. Case-by-case
considerations and decisions will take hold and thus
make categorization and involved formulation simply
impossible. Since both Higher Regional Court’s
decisions have allowed an appeal, we will certainly
have a decision of the Federal Supreme Court (BGH)
on this soon. However, I expect that the BGH will also
tend to rule on a case-by-case basis so that even
after the amendment to the Corona Act, the main
thing will be for the parties to sit down at a table and
come to an agreement, if they do not want to run the
risk of literally having to drop their pants in court
proceedings that regularly take place in front of the
entire public.
In the end, investors and operators must figure out
which solution is best for the property and the parties.
And they must accept that even the best solution is
not set in stone, but will have to evolve in the second,
third or fourth addendum during a pandemic and
remain willing to compromise.
“The legal situation regardingSection 313 of the German CivilCode is not yet certain andremains exciting. Case-by-caseconsiderations and decisions willtake hold and thus makecategorization and clauses simplyimpossible.”
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“Hotels are here to stay“
Interview
29
Ascan Kókai | ECE Real Estate Partners
In the middle of the Corona crisis, ECE decided to
launch a hotel fund. What were the reasons for
this decision?
In fact, the origin of the decision for the asset class
goes back quite some time. Alexander Otto had been
investing privately in hotel properties in the leisure
sector for years and the ECE Group is one of the
largest developers of hotels in urban center locations
in German-speaking countries. After investing in the
Ruby Hotel Group as the main shareholder in 2019, it
was only natural, against the backdrop of this
comprehensive expertise as investor, developer and
now also indirectly in the operational business, to
strategically implement a diversification in our fund
business into another asset class with operating
properties. But what the Corona crisis has caused is
that we have decided not to position the new hotel
fund in the core or core+ segment, but to take
advantage of the countercyclical opportunity for our
investors by leveraging the recovery of the markets
and realizing value-add initiatives at asset level to
create value for our investors.
We have a medium to long-term investment horizon.
Our understanding is that the fundamentals of the
sector will continue to converge with the longer-term
trends even after the crisis and that we can rely on
the facts, without the burden o a historic portfolio of
hotels, that the global middle class is growing steadily
with its wealth, that demographics offer more lifetime
for travel and that traveling is part of the lifestyle of a
growing number of people to satisfy their need for
experiences. This combined with the global economic
linkages will thus offer further growth in the demand
for travel and therefore accommodation services
such as hotels.
In addition to the network of the immediate team of
ECE Real Estate Partners in Hamburg and
Luxembourg, we can also access the reach of our
colleagues in affiliates of the ECE Group in Europe
and, if required, the various functions located there.
What strategic direction is planned for the hotel
fund?
The recovery phase of the hotel market is assumed
by market observers to be up to four years. This
means that the investment phase of the fund falls
entirely within this period. However, it would be too
short-sighted if we only wanted to take advantage of
the market phase in the simple expectation of yield
compressions. That is why we deliberately seek out
properties and selective projects with our pan-
European strategy where value can be added at asset
level. This can be the restructuring of existing leases
e.g., from fixed leases to hybrid structures with
simultaneous extension, which relieve tenants
operationally and offer the investor upside potential or
“We have a medium to long termhorizon and position our fund inthe value-add segment to createvalue for our investors.”
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Interview – Ascan Kókai
30
the exchange of operators / brands as well as Capex
measures to carry out renovations in the recovery
phase or to implement repositioning before the
markets stabilize, to then be very well positioned for
maximum performance when the markets have
stabilized. This should be reflected in current returns
as well as exit prices.
What arguments can you offer to the current
doubters of the hotel investment and lender
market?
Hotels are here to stay! But it is important to
understand the sector, to know and assess the
players, and to understand which brands work in
which markets and micro-locations. For this asset
class, we therefore consider it essential to have our
own in-house experts to handle the management of
the investments. Nevertheless, it is also important for
us to involve external experts from various markets to
ensure that current developments and opportunities
are monitored and presented. These can then also be
considered in the company's own portfolio. This
exchange is very important and so is the independent
“We see that, on the one hand,there is still little product on themarket, but on the other hand,there is great uncertainty in theprice. I expect to see movementhere in the next six months, as thepressure on operators, portfolioholders and banks continues toincrease.“
opinion that these partners can offer due to their
involvement in a variety of projects with a variety of
market participants.
The hotel investment business has a distinct cross-
border profile, which should not be surprising given
the underlying business in these properties. In this
respect, there are always opportunities that investors
in the local market do not see in this way, or where
foreign investors want to invest for strategic reasons
e.g., in Germany, one of the largest tourism markets
in Europe with a multicentric market structure and
one of the strongest economies in the world.
What are your market expectations for 2021?
We see that on the one hand there is still little product
on the market, but on the other hand, there is a major
uncertainty when it comes to the valuation of a
property. I expect in the next six months, with the
persistence of the crisis also beyond lockdowns, that
the pressure on operators, owners and banks will
increase, when the exemption conditions regarding
insolvency proceedings will end, loans must be
serviced again together with repayment and deferred
rents that must be paid in arrears. This at a time when
revenues are still expected to stay behind the pre-
crisis level of 2018/19. Summer 2021 will certainly see
a boom in the leisure sector like 2020, but trade fairs,
major cultural or sporting events, congresses and
conferences have lead times of twelve to 36 months,
and it remains to be seen how willing individuals will
be to participate in such events again at short notice.
Even where they do take place, it remains
questionable whether they will be able to attract
significant numbers of visitors this year as they have
in the recent past.
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Interview – Ascan Kókai
31
Companies will also probably remain skeptical this
year about the extent to which they want to expose
their employees to a potentially increased risk of
infection.
Nevertheless, self-determined economic action will
offer hoteliers and all market participants a
brightening of the market assessment, with the risk
that late effects of the pandemic will initially be
underestimated. These may not fully materialize until
2022, providing opportunities for well-capitalized
investors.
“It is up to each individual to getback to conferences and events inthe short term. Companies arelikely to remain skeptical aboutexposing their employees to apotential increased risk ofcontagion this year.”
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“Even in earlier crises, leisure hotels were an anchor of stability“
Interview
32
Mr. Sroka, what impressions have shaped your
hotel year 2020?
January, February 2020 started great, we never had
such a good start into a year and so many
reservations "on the books". Then the first lockdown
came, and we had to close the hotels from the 18th of
March. It is easy to forget, but in the beginning, it was
a doomsday situation, because we didn't know when
we would be able to open again and if we would
survive financially.
Fortunately, we secured special interest-free loans for
our hotels from the investment bank of Schleswig
Holstein. Then on the 18th of May, we were allowed to
reopen, and bookings were soaring. We adjusted the
rate and had a great season until the end of October.
Then the second lockdown came and honestly, I think
no one expected it to be so hard and long. We hope
that we will be able to reopen in April after five
months of closure.
Financially, the lockdown was and still is a major
challenge, as we have not yet seen any payments
from the November and December aid, not to
mention the bridging allowance III, except for the
short-time allowance. (Note: Corona subsidy
programs of the German ministries of economics and
finance)
Have new project and product ideas emerged
from the crisis year?
We believe that we are well positioned with our
broad-based hotel products on the coasts. However,
we always think of how digitalization can contribute
to save costs, reduce staff, how to work more
entrepreneurially and to come through possible future
lockdowns more easily from a financial perspective.
Has your target group changed?
In 2020, we noticed that we had a 25% share of
guests who usually not travel domestically and
therefore, visited the German coast for the first time.
We have a good opportunity to generate new regular
customers.
Are leisure hotels in Germany the new anchor of
stability or was its role undervalued before the
crisis?
Both! We have noticed that institutional investors
probably concentrated too one-sided on city hotels
before the crisis and are now showing an increased
“The Corona crisis gives us theopportunity to generate newregular customers.”
“From mid-May to October we hada great season. Then the secondlockdown came and honestly noone expected it to be so hard andlong.”
Jens Sroka | Heimathafen Hotels
“We believe that we are wellequipped with our broad-basedhotel products.“
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Interview – Jens Sroka
33
“In the vacation hotel industry, it isdefinitely possible to achieve 90%room occupancy per year at verygood rates.”
interest in the leisure hotel industry to minimize their
risk. For years we have been aware that the leisure
hotels segment had always been the winner in past
crises and stood for stability. In addition, it is possible
for resort hotels to achieve occupancy rates of over
90% per year at very good rates.
What are your expectations for 2021? In which
market scenarios do you think or is it impossible
to plan anyway?
We expect a good season in 2021 if virus mutations
will not put a spoke in our wheel. We will try to build
up a financial buffer, as we, unfortunately, expect
another lockdown in the coming winter.
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“Our actions are future-oriented“
Interview
34
Yoram Biton | Leonardo Hotels
Mr. Biton, you and your group have a view on the
European hotel market. How do you see the
German hotel market positioned in this
comparison?
As a hotel group operating throughout Europe, we at
Leonardo Hotels Central Europe face an even greater
challenge than hotel chains that "only" operate in
Germany. Our business unit with the other core
markets Italy, Austria, Switzerland, Spain, Poland and
Hungary is still facing a very hard time. The various
lockdowns are not making it any easier.
Nevertheless, we have managed to put a successful
crisis management in place to safeguard the
company's liquidity. We are currently in a position
where we do not have to announce any compulsory
redundancies for operational reasons. Our actions are
future-oriented, we are facing up to new challenges,
updating and optimizing our processes to make them
fit for the future.
In this context, Germany plays one of the most
important roles for us. With a hotel share of around
65%, Germany is our largest market. We are currently
represented at 59 locations - from Aachen to
Wolfsburg. Germany has proven to be more resilient
than the other European countries. We will continue
to expand here and also tap into new segments.
Have you succeeded in closing ranks with your
owners?
Leonardo Hotels belongs to the Fattal Hotel Group,
which is listed on the stock exchange. Thus, our
liquidity was secured at all times.
We communicated very openly with all our colleagues
and partners at all times, created new agreements
and raised fresh capital from our investors. All this
was done in close cooperation with our cash-flow-
strong owners, which was a great advantage in
demonstrating our joint strength and mastering the
crisis. All business units act as a single unit, and we
support and strengthen each other.
Is it a strategic advantage of Leonardo Hotels to
have built up a significant hotel real estate
portfolio since entering the European market?
We have a healthy portfolio of hotels in primary and
secondary cities. This is of great advantage. In major
metropolises such as Berlin, Barcelona, Milan, Rome,
Warsaw, but also in secondary cities such as
Dortmund, Verona and Bilbao, we convince guests
with our location concept, focusing on short
distances to public transport, airports, trade fairs,
sights, culture and shopping opportunities. We are
sure that traveling - albeit in a changed form - will
“Germany has proven to be moreresilient than the other Europeancountries. We will continue toexpand here and also tap into newsegements.“
“We are currently in a positionwhere we do not have toannounce any compulsoryredundancies for operationalreasons.“
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Interview – Yoram Biton
35
come again. The Corona experience has also taught
us that we should focus more on B and C locations.
Smaller destinations with a large regional draw have
developed a special charm. In terms of our brands,
for example, we were able to achieve good
occupancy rates with our lifestyle brand NYX Hotels
as well as our boutique hotels even during the crisis.
What perspectives do you currently see for the
market in 2021?
The economic impact of the Corona pandemic has of
course also affected hotel properties, which were
facing massive losses in revenue and value as well as
investment uncertainty. The length of the crisis is
decisive for how the value of the property will develop
further. However, Germany is more than ever
perceived as a "safe haven" compared to other
investment locations. We expect and hope for a
catch-up effect in the market depending on the length
of the crisis and a well-founded exit scenario
supported by politics.
Where do you see Leonardo Hotels in five years?
Since our launch in Europe in 2006 we have been
"Our motto: Leonardo has cometo stay."
focusing on healthy and gradual expansion in Europe.
Even this year, we are holding on to five new
openings - in Warsaw and Barcelona, as well as
Eschborn, Nuremberg and Augsburg. We already
have further projects in the pipeline up to 2024 in
Hamburg and Berlin. Securing liquidity will be more
important than ever for us. We are pursuing an
expansion strategy that is diversified and based on a
good mix of owned and managed hotels. An
extensive, dynamic offering - supported by our multi-
brand strategy, even at a single location - has
successfully established itself, even in times of crisis.
We will continue to build on this. As travel behavior
will continue to change due to the Corona pandemic,
we are also looking at new segments with new
concepts. In five years, we will certainly have
achieved our goal of having an exclusive selection of
resort and leisure hotels in our portfolio. In Israel, we
are already the market leader in this area and can
draw on the expertise of our parent company.
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Contact
Andreas Ewald
Managing Director
E-Mail: [email protected]
Telephone: +49 40 368810150
Constantin M. Klementz
Director
E-Mail: [email protected]
Telephone: +49 40 368810163
Roman Tkaczenko
Manager
E-Mail: [email protected]
Telephone: +49 40 368810164
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Engel & Völkers Hotel Consulting GmbH
License partner of Engel & Völkers Commercial GmbH
Managing Director Andreas Ewald
Stadthausbrücke 5
20355 Hamburg
Telephone: +49 (0) 40-368810-150
www.engelvoelkershotel.com
Fairmas GmbH
EUREF-Campus 13
10829 Berlin
+49 30 322 940 520
www.fairmas.com
Disclaimer
All content included in this Market Report is for general information purpose only and Engel & Völkers Hotel Consulting
assumes no responsibility for possible errors. Thus, the drawn market overview cannot substitute in-depth research as well as
expert consultation. Although this report was written with great diligence, claims of entire validity, integrity and/or currency
cannot be guaranteed, especially in terms of occasional instances. The information in this report is true and complete to the
best of our knowledge, but Engel & Völkers Hotel Consulting GmbH, a licensee of Engel & Völkers and/or Fairmas GmbH
cannot be held liable for any content.
Disclaimer and Imprint
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