Hotel Market Report Germany 2021 - Engel & Völkers
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© Le Méridien Hotel, Hamburg
Hotel Market Report Germany 2021
|
We stick to it: The world will travel again! 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 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 |
Content overview
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
Diese Fläche mit einem Bild überlagern
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
© Le Méridien Hotel, Hamburg
4 |
KPIs · Transactions · Top 7 cities
Figures – Data – Facts
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Tortue Design Hotel Hamburg
The cards on the hotel market are (re)shuffled
Operators and concepts are amid a structural transformation The return of the actual value drivers of a hotel property
The Corona crisis will lead to a structural transformation of the hotel industry, Location, market, operator and contract – these elements have always been the
especially in metropolitan areas. Takeovers of (partial) operating companies key value drivers of a hotel property. Although the industry itself is least
by well-capitalized market players could be already observed in 2020 and are responsible for its predicament, the coming years will see a return to these core
also expected in the coming months. In parallel, there will be a selection values. The exogenous shock and the market recovery expected for the next few
process in the course of the future market recovery. Target group-specific, years clearly show that only hotels with a correspondingly attractive profile will
ecological, sustainable and digitally oriented hotel products will benefit first meet the expectations of investors and banks.
from returning guests.
Owners will have to adapt to a new distribution of roles in the Investment class hotel - between herd instinct and attractive
medium term buying opportunities
Hotel property owners in Germany were able to benefit from secured cash The delta in price expectations between buyers and sellers still exists in Q1
flows in recent years, also due to the widespread fixed lease agreements in 2021. While the financing bottleneck puts equity-strong buyers in the
this country. The actual recovery of the hotel market as well as the supposed pole position, portfolio holders are often not yet in the (emergency)
performance of the operator are now coming to the fore due to hybrid situation of having to accept such price reductions. In addition, the
arrangements, deferral arrangements and repayment mechanisms. A new, omnipresent financing bottleneck inhibits the transaction market. Project
more active role of owners is required. developers and owners with expiring mortgages are also impacted by the
reluctance of their financing partners.
6 |
Tourism in Europe – overnight stays 2020 vs. 2019
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.
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%
No indication* 0 to -40% -40% to -60% > -61% to -100%
7 | *Official statistical data for 2020 were not available at the time of report preparation
Germany 2000-2020 - Overnight stays, beds & RevPAR
Overnight stays in million for all accommodation establishments
09/11 Financial crisis
Beds in million for hotel accommodation establishments
Beds Total nights Nights nat. Nights int.
600 600
4,5
4,5
CAGR ‘08-‘19 1,0% 2,7% 2,4% 4,3%
3,8
3,7 *** 4,0
4,0
3,5 3,6 3,6 3,6 3,6 3,6 3,6
500 3,5 3,5
3,4*
500
3,5
73 € 74 € 3,5
70 € 71 € 71 € 72 €
66 € 66 €
400 400
3,0
63 € 63 € 63 € 3,0
2,5 2,5
2,5
53 € 2,5
300 300
406
376 390
2,0
357 366 2,0
340 348
329 338
313 314 320
200 305 307
200 1,5
270 1,5
1,0
1,0
100 100
26 € **
0,5
0,5
69 72 76 80 81 84 88 90
43 41 57 55 60 64
32
0 0 0,0
0,0
2000 2001 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Beds in lodging establishments Nights nat. Nights int. RevPAR (Representative data collection since 2008)
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.
8 | Source: , Federal Statistical Office | *Data collection criteria have been changed; **2020 also includes closed operations; *** No data due to closures.
Overnight stays in cities and leisure regions year-on-year
Lockdown I Lodging ban & Lockdown II
21%
25%
13%
8% 9%
4% Top 7 decrease
11% -2% ’20 vs. ’19
0% -10%
4% Cities -57%
Leisure regions -16%
-25%
-51%
-50%
-62% -48%
-54% -51%
-63% -65% -80%
-75%
-73% -91%
-93%
-85% -94%
-96% -87%
-100%
January
Januar February
Februar March
März April
April May
Mai June
Juni July
Juli August September October
Oktober November December
Dezember
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
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
Hotel transaction volume / prime yields 2010 – 2020
6,0 7,0%
5,2
4,9 6,0%
5,0 6,3%
Hotel transaction volume in EUR billion
6,0% 4,4
5,8% 5,8%
5,4% 4,0 4,0 5,0%
4,0 5,0% 4,0 – 4,5%*
All-Risk Yield
4,5% 4,0%
3,0
4,1% 4,0%
3,0 3,8%
3,0%
2,1
2,0 1,6
2,0%
1,1 1,2
1,0 0,8
1,0%
0,0 0,0%
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 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 | *Source: Survey Sentiment Report 2020 | 2021 - EVHCHotel transactions 2020 in a nutshell
Transaction market shaped by pandemic Further focus on A-locations expected in 2021
39%
Post-Lockdown I Apr-Dez 35% A-Cities
32%
65%
Pre-Lockdown I Jan-Mar B-Cities
10% C-Cities
7% D-Cities
11%
Vacation regions
The timing of the Corona pandemic is reflected in the hotel transaction market. More than a third of all investments were made in A locations in 2020. It can be
Approximately 65% of transactions were completed before the start of the 1st assumed that this share will increase in the future. This was also stated by
lockdown in March. Actual post-lockdown hotel transactions were characterized investors in the survey for the Sentiment Report Germany 2020 / 2021. A return to
by sale and leaseback deals or larger mixed-use portfolios in which hotel was the the top locations can be seen as a signal of the increased need for security after
subordinate component of asset classes. investors were particularly targeting B and C locations in recent years due to a
shortage of products and lack of investment alternatives.
11 | Source: Thomas Daily, E&V ResearchHotel transactions 2020 in a nutshell
Long-term investors remain loyal to the asset class The risk premium for hotel assets increases
2% Owner-Operator 8%
Foundations 1% 3% Project developer
7%
4% Private
5% Family Office 6%
Shopping Center
Real estate corporations/ REITS 5% Operator 5% Hotel
31% High Street Retail
4%
Logistics Warehouses
10% Specialized funds 3% Cities)
Office (Ø Top-7 Städte)
2%
15%
24% 1%
Insurances/ Pension funds
Investment/ Asset Manager
0%
2010 2012 2014 2016
20102011201220132014201520162017 2018 2020
201820192020
Activity by professional investors slowed sharply after the 1st lockdown. In Naturally, the Corona crisis has led to a change in investors' perception of the
addition to the general market uncertainty, the largely stable price level and the asset class hotel. The low investment volume after the 1st lockdown in March last
lack of financing options are two of the main reasons to be named. Opportunistic year also makes it difficult to determine the exact risk premium. Compared to the
real estate investors with a strong equity background also failed to make their previous "crisis winners" residential and logistics, a trend reversal can be seen for
move due to the price delta. On the contrary, equity backed investors succeeded the time being in the heavily affected asset classes hotel and retail. The yield
in acquiring selected operator platforms. Nevertheless, a few investors were able compression of the years 2010-2019 has stopped, reflecting the impacts for the
to secure hotels in highly attractive locations with creditworthy tenants. hotel industry.
12 | Source: Thomas Daily, E&V ResearchSelected hotel transactions in 2020 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 13 | Source: Thomas Daily, E&V Research
Market characteristics · Resilience
Top 7 city destinations
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Nyx Hotel München, © Andreas RehkoppKey performance indicators 2020 at a glance
Cities Overnights ADR Occupancy RevPAR Trans.-Vol.
12.3 mln EUR 85 29% EUR 25 approx. EUR 400 mln
Berlin
-60% -15% -64% -69% -27%
6.8 mln EUR 96 25% EUR 24 approx. EUR 250 mln
Munich
-63% -26% -66% -75% -58%
6.7 mln EUR 94 32% EUR 30 approx. EUR 160 mln
Hamburg
-56% -18% -59% - 66% -11%
3.9 mln EUR 96 23% EUR 22 approx. EUR 100 mln
Frankfurt a.M.
-64% -11% -67% -70% -88%
2.4 mln EUR 95 29% EUR 28 approx. EUR 50 mln
Cologne
-63% -20% -62% -69% -86%
1.8 mln EUR 106 24% EUR 25 approx. EUR 130 mln
Dusseldorf
-62% -7% -66% -68% -68%
1.6 mln EUR 95 25% EUR 24 approx. EUR 50 mln
Stuttgart
-61% -12% -65% -69% -72%
% deviation represents the development compared to the previous year
15 | Source: , State Statistical Offices, E&V Research | Utilization also includes closed operationsCrisis 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.
GDP per inhabitant ‘18
Economic power of a city destination as an important
component of tourism demand
200%
180%
160%
Share of trade fair tourism in overnight stays ‘19 140% Ratio of supply to demand development ‘10-‘19
Assessment of whether increases in supply could be
120%
Significance of trade fair and congress tourism for the 100%
demand structure of the respective city metropolis 80%
compensated by an increase in demand
60%
40%
Volatility of demand over the course of the year Share of overnight stays by national guests ‘19
20%
0%
Describes the seasonality as well as the dependence on Dependence of the destination on functioning international
extraordinary events of a city metropolis travel flows
RevPAR development 2015-2019 Bed occupancy ‘19
Derivation of which performance hotels were able to achieve Derivation of tourist intensity per available bed
in view of the overriding market development
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
16 | Source: , State Statistical Offices, trade fair companies of the respective cities, E&V ResearchMarket characteristics at a glance
Share of fair
GDP Nights/ beds Nights nat. tourists Occupancy (beds) RevPAR Demand stability
City per capita ‘18 % change ‘10 - ’19 % share ’19 in % ’19 % dev. ‘15 -’19 ‘19
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%
17 |Berlin
EUR 40,105
GDP per inhabitant ‘18
7% share of nights Nights +38% / Beds +31%
Fair guests / nights ’19 Market develop. ‘10-’19
High 55% of all nights
Demand stability ’19 Proportion nat. guests ’19
53%
Diese Fläche mit einem Bild überlagern
+11%
RevPAR ‘15-’19 Bed occupancy ’19
Berlin Ø Top 7
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.
18 |Munich
EUR 79,690
GDP per inhabitant ‘18
14% share of nights Nights +64% / Beds +60%
120%
Fair guests / nights ’19 Market develop. ‘10-’19
100%
80%
60%
40%
20%
0%
-20%
-40%
Medium 52% of all nights
-60%
Demand stability ’19 Proportion nat. guests ’19
57%
Diese Fläche mit einem Bild überlagern
-2.8%
RevPAR ‘15-’19 Bed occupancy ’19
Munich Ø Top 7
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.
19 |Hamburg
EUR 64,771
GDP per inhabitant ‘18
5% share of nights Nights +72% / Beds +59%
140%
120%
Fair guests / nights ’19 Market develop. ‘10-’19
100%
80%
60%
40%
20%
Medium 0%
75% of all nights
Demand stability ’19 Proportion nat. guests ’19
58%
Diese Fläche mit einem Bild überlagern
+4.9%
RevPAR ‘15-’19 Bed occupancy ’19
Hamburg Ø Top 7
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.
20 |Frankfurt
EUR 94,190
GDP per inhabitant ‘18
18% share of nights 150%
Nights +78% / Beds +60%
Fair guests / nights ’19 Market develop. ‘10-’19
100%
50%
0%
-50%
High -100%
56% of all nights
Demand stability ’19 Proportion nat. guests ‚19
51%
Diese Fläche mit einem Bild überlagern
-5.5%
RevPAR ‘15-’19 Bed occupancy ’19
Frankfurt Ø Top 7
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.
21 |Cologne
EUR 59,588 EUR
GDP per inhabitant ‘18
250%
200%
27% share of nights Nights +44% / Beds +18%
150%
Fair guests / nights ’19 100%
Market develop. ‘10-’19
50%
High 0%
65% of all nights
Demand stability ’19 Proportion nat. guests ’19
53%
Diese Fläche mit einem Bild überlagern
+12.9%
RevPAR ‘15-’19 Bed occupancy ’19
Cologne Ø Top 7
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.
22 |Dusseldorf
EUR 81,563
GDP per inhabitant ‘18
250%
200%
29% share of nights Nights +32% / Beds +24%
150%
Fair tourism / Nights ’19 100%
Market develop. ‘10-’19
50%
Low 0%
60% of all nights
Demand stability ’19 Proportion nat. guests ’19
46%
Diese Fläche mit einem Bild überlagern
+13.3%
RevPAR ‘15-’19 Bed occupancy ’19
Dusseldorf Ø Top 7
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.
23 |Stuttgart
EUR 90,518
GDP per inhabitant ‘18
29% share of nights 140%
Nights +51% / Beds +30%
120%
Fair tourism / Nights ’19
100%
80%
Market develop. ‘10-’19
60%
40%
20%
Medium 0%
69% of all nights
Demand stability ’19 Proportion nat. guests ’19
50%
Diese Fläche mit einem Bild überlagern
+7.5%
RevPAR ‘15-’19 Bed occupancy ’19
Stuttgart Ø Top 7
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.
24 |Guest articles · Interviews
Market opinions
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Beach Motel – St. Peter OrdingGuest article
”The crisis calls for investors and operators to close ranks“
We are still working on these subjects, albeit with are wondering what the future of the contractual
somewhat different preliminary considerations and relationship will look like. Particularly because the
justifications in terms of content due to the changes legislative changes that have been enacted have not
in the law and case law that have occurred in the yet brought the solutions they had hoped for. In fact,
meantime. Since the middle of 2020, we have been there is now even more uncertainty and confusion.
Marc Werner LL.M. | Hogan Lovells
handling more and more acquisitions in the area of Deferrals continue to increase the debt burden of
hotel M&A and portfolio transfers of operator operators and once the exemption conditions under
What a year! After dealing with hotels and hotel
contracts (rental/lease/management contracts). insolvency law end, it can very quickly lead to
operator contracts for over 27 years, my life as a real
insolvency procedures. The conversion of contracts
estate lawyer has changed completely since March Therefore, new project developments or the purchase
to pure turnover-based rental or lease agreements
2020. or sale of hotel assets appeared rather rarely on our
demanded by many operators cannot and will not
desks in 2020. Fortunately, they still exist and some
While the hotel industry went from one success story happen as long as regulated funds, which make up
of them are very exciting.
to the other over the last ten years, one project was the greatest share of owners of German business
hotels, are the largest investors in Germany. BaFin
chasing the next, and we were able to expand our “The conversion of contracts to
team due to many hotel real estate transactions, this pure turnover-based rental or (German financial supervision authority) has expressly
very same team is now working almost day and night lease agreements demanded by clarified once again that hotel investors are not
on behalf of the respective asset management teams many operators cannot and will permitted to conclude pure turnover or profit rental or
to negotiate and formulate addenda for lease not happen as long as regulated lease agreements. It may be in the interest of
agreements. Thus, in the first months of the funds represent the main share of investors to allow partial exceptions to this for a
pandemic, we were busy negotiating countless
owners of German business limited period. However, nothing changes in the result
deferral and (partial) waiver agreements, term
hotels.” of the fundamental inadmissibility of these contracts
extensions, and postponements of indexations In the meantime, we have arrived at the second or for the stock of regulated investors.
clauses. third wave of addenda and operators and investors
26 |Guest article – Marc Werner
In the meantime, the wave of consolidation of hotel the operating agreement. Of course, so-called limits on time and scope. An investor must be able to
operators has also reached us at a significantly "corona-clauses” are being discussed particularly. put a "price tag" on this clause in order to calculate
increased speed: Premier Inn took over a portfolio of Although there is no such thing as a “standard” and thus evaluate the extent of a possible (especially
operator contracts, as did Westmont or the HR corona clause yet (and probably never will), no new the maximum) rent reduction. Incidentally, shifts in
Group. Entire operator platforms are for sale and operating agreement is likely to be concluded today risk between landlord and tenant or lessor and lessee
private equity companies are to be found as buyers. without a provision relating to "force majeure", which are likely to develop to an increasing extent. What we
Only hotel properties are not being sold at a discount includes virus pandemics and their legal have called "hybrid leases" in the past will emerge
(yet). However, some investors are waiting for consequences. even more as a more deliberate allocation of risk
opportunities. between the parties. I see particularly a shift toward
“The only solution to this crisis is shorter terms, but also toward obligations of the
It remains exciting in our industry and the longer the solidarity between investors and
operator to establish "crisis reserves" in addition to
crisis lasts, the more increases the tenseness of the operators. From our point of view,
the FF&E reserve. It could also be conceivable to
parties involved. Solidarity between investors and this has mostly worked well in
establish a new kind of rent/lease security that covers
operators seems to be the only solution to this crisis. recent months.“
the investor's (partial) rent default risk in case of a
From our point of view, this has mostly worked well in There is now every form of variety. What is
pandemic.
recent months. It should be emphasized that there is crystallizing, however, is that investors who are
no universally valid strategy. Most institutional naturally not overjoyed about these new Corona Whether there will be new (affordable) insurance
investors are highly professional, looking at each clauses, but who are granting operators an policies for such cases remains to be seen. However,
operator and site and define a strategy with their "emergency clause", are demanding that the I am quite sure that we will not see any pure turnover-
operating partner on how to proceed. regulations on possible rent reductions as a result of based rent or lease agreements even after the crisis.
a drop in sales caused by a pandemic must be clear Not only have they not proven in previous crises,
Even if fixed lease or rental agreements will remain and unambiguous in terms of the preconditions and these kind of contracts are also not bankable or
the standard in Germany in the future, due to Corona,
interesting for German institutional investors.
more and more new clauses are finding their way into
27 |Guest article – Marc Werner
Interestingly, investors are currently even arguing decisions have allowed an appeal, we will certainly
against operators from such contracts referring to have a decision of the Federal Supreme Court (BGH)
Section 313 of the German Civil Code (BGB) for on this soon. However, I expect that the BGH will also
payment of rent. tend to rule on a case-by-case basis so that even
after the amendment to the Corona Act, the main
“The legal situation regarding
thing will be for the parties to sit down at a table and
Section 313 of the German Civil
come to an agreement, if they do not want to run the
Code is not yet certain and
remains exciting. Case-by-case risk of literally having to drop their pants in court
considerations and decisions will proceedings that regularly take place in front of the
take hold and thus make entire public.
categorization and clauses simply
In the end, investors and operators must figure out
impossible.”
which solution is best for the property and the parties.
I think this is a clever and not at all far-fetched idea. And they must accept that even the best solution is
Overall, we will see how case law will deal with not set in stone, but will have to evolve in the second,
Section 313 BGB and hotel operating agreements. third or fourth addendum during a pandemic and
Despite the decisions of the Munich Regional Court, remain willing to compromise.
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
28 |Interview
“Hotels are here to stay“
that we have decided not to position the new hotel such as hotels.
fund in the core or core+ segment, but to take
In addition to the network of the immediate team of
advantage of the countercyclical opportunity for our
ECE Real Estate Partners in Hamburg and
investors by leveraging the recovery of the markets
Luxembourg, we can also access the reach of our
and realizing value-add initiatives at asset level to
Ascan Kókai | ECE Real Estate Partners colleagues in affiliates of the ECE Group in Europe
create value for our investors.
and, if required, the various functions located there.
In the middle of the Corona crisis, ECE decided to “We have a medium to long term
What strategic direction is planned for the hotel
launch a hotel fund. What were the reasons for horizon and position our fund in
fund?
this decision? the value-add segment to create
value for our investors.” The recovery phase of the hotel market is assumed
In fact, the origin of the decision for the asset class
by market observers to be up to four years. This
goes back quite some time. Alexander Otto had been We have a medium to long-term investment horizon.
means that the investment phase of the fund falls
investing privately in hotel properties in the leisure Our understanding is that the fundamentals of the
entirely within this period. However, it would be too
sector for years and the ECE Group is one of the sector will continue to converge with the longer-term
short-sighted if we only wanted to take advantage of
largest developers of hotels in urban center locations trends even after the crisis and that we can rely on
the market phase in the simple expectation of yield
in German-speaking countries. After investing in the the facts, without the burden o a historic portfolio of
compressions. That is why we deliberately seek out
Ruby Hotel Group as the main shareholder in 2019, it hotels, that the global middle class is growing steadily
properties and selective projects with our pan-
was only natural, against the backdrop of this with its wealth, that demographics offer more lifetime
European strategy where value can be added at asset
comprehensive expertise as investor, developer and for travel and that traveling is part of the lifestyle of a
level. This can be the restructuring of existing leases
now also indirectly in the operational business, to growing number of people to satisfy their need for
e.g., from fixed leases to hybrid structures with
strategically implement a diversification in our fund experiences. This combined with the global economic
simultaneous extension, which relieve tenants
business into another asset class with operating linkages will thus offer further growth in the demand
operationally and offer the investor upside potential or
properties. But what the Corona crisis has caused is for travel and therefore accommodation services
29 |Interview – Ascan Kókai
the exchange of operators / brands as well as Capex opinion that these partners can offer due to their What are your market expectations for 2021?
measures to carry out renovations in the recovery involvement in a variety of projects with a variety of
We see that on the one hand there is still little product
phase or to implement repositioning before the market participants.
on the market, but on the other hand, there is a major
markets stabilize, to then be very well positioned for
uncertainty when it comes to the valuation of a
maximum performance when the markets have “We see that, on the one hand,
stabilized. This should be reflected in current returns there is still little product on the property. I expect in the next six months, with the
as well as exit prices. market, but on the other hand, persistence of the crisis also beyond lockdowns, that
there is great uncertainty in the the pressure on operators, owners and banks will
What arguments can you offer to the current price. I expect to see movement increase, when the exemption conditions regarding
doubters of the hotel investment and lender here in the next six months, as the insolvency proceedings will end, loans must be
market? pressure on operators, portfolio serviced again together with repayment and deferred
holders and banks continues to rents that must be paid in arrears. This at a time when
Hotels are here to stay! But it is important to increase.“ revenues are still expected to stay behind the pre-
understand the sector, to know and assess the
crisis level of 2018/19. Summer 2021 will certainly see
players, and to understand which brands work in The hotel investment business has a distinct cross-
a boom in the leisure sector like 2020, but trade fairs,
which markets and micro-locations. For this asset border profile, which should not be surprising given
major cultural or sporting events, congresses and
class, we therefore consider it essential to have our the underlying business in these properties. In this
conferences have lead times of twelve to 36 months,
own in-house experts to handle the management of respect, there are always opportunities that investors
and it remains to be seen how willing individuals will
the investments. Nevertheless, it is also important for in the local market do not see in this way, or where
be to participate in such events again at short notice.
us to involve external experts from various markets to foreign investors want to invest for strategic reasons
Even where they do take place, it remains
ensure that current developments and opportunities e.g., in Germany, one of the largest tourism markets
questionable whether they will be able to attract
are monitored and presented. These can then also be in Europe with a multicentric market structure and
significant numbers of visitors this year as they have
considered in the company's own portfolio. This one of the strongest economies in the world.
in the recent past.
exchange is very important and so is the independent
30 |Interview – Ascan Kókai 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. “It is up to each individual to get back to conferences and events in the short term. Companies are likely to remain skeptical about exposing their employees to a potential increased risk of contagion this year.” 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. 31 |
Interview
“Even in earlier crises, leisure hotels were an anchor of stability“
Fortunately, we secured special interest-free loans for We believe that we are well positioned with our
our hotels from the investment bank of Schleswig broad-based hotel products on the coasts. However,
Holstein. Then on the 18th of May, we were allowed to we always think of how digitalization can contribute
reopen, and bookings were soaring. We adjusted the to save costs, reduce staff, how to work more
rate and had a great season until the end of October. entrepreneurially and to come through possible future
Jens Sroka | Heimathafen Hotels
Then the second lockdown came and honestly, I think lockdowns more easily from a financial perspective.
no one expected it to be so hard and long. We hope
Mr. Sroka, what impressions have shaped your Has your target group changed?
that we will be able to reopen in April after five
hotel year 2020? In 2020, we noticed that we had a 25% share of
months of closure.
guests who usually not travel domestically and
January, February 2020 started great, we never had “We believe that we are well therefore, visited the German coast for the first time.
such a good start into a year and so many equipped with our broad-based We have a good opportunity to generate new regular
reservations "on the books". Then the first lockdown hotel products.“ customers.
came, and we had to close the hotels from the 18th of
March. It is easy to forget, but in the beginning, it was Financially, the lockdown was and still is a major “The Corona crisis gives us the
a doomsday situation, because we didn't know when challenge, as we have not yet seen any payments opportunity to generate new
we would be able to open again and if we would from the November and December aid, not to regular customers.”
survive financially. mention the bridging allowance III, except for the
Are leisure hotels in Germany the new anchor of
short-time allowance. (Note: Corona subsidy
“From mid-May to October we had stability or was its role undervalued before the
a great season. Then the second programs of the German ministries of economics and
crisis?
lockdown came and honestly no finance)
one expected it to be so hard and Have new project and product ideas emerged
Both! We have noticed that institutional investors
long.” from the crisis year?
probably concentrated too one-sided on city hotels
before the crisis and are now showing an increased
32 |Interview – Jens Sroka
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.
“In the vacation hotel industry, it is
definitely possible to achieve 90%
room occupancy 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.
33 |Interview
“Our actions are future-oriented“
Nevertheless, we have managed to put a successful which is listed on the stock exchange. Thus, our
crisis management in place to safeguard the liquidity was secured at all times.
company's liquidity. We are currently in a position
We communicated very openly with all our colleagues
where we do not have to announce any compulsory
and partners at all times, created new agreements
redundancies for operational reasons. Our actions are
Yoram Biton | Leonardo Hotels and raised fresh capital from our investors. All this
future-oriented, we are facing up to new challenges,
was done in close cooperation with our cash-flow-
updating and optimizing our processes to make them
Mr. Biton, you and your group have a view on the strong owners, which was a great advantage in
fit for the future.
European hotel market. How do you see the demonstrating our joint strength and mastering the
“Germany has proven to be more crisis. All business units act as a single unit, and we
German hotel market positioned in this
resilient than the other European support and strengthen each other.
comparison?
countries. We will continue to
Is it a strategic advantage of Leonardo Hotels to
As a hotel group operating throughout Europe, we at expand here and also tap into new
Leonardo Hotels Central Europe face an even greater segements.“ have built up a significant hotel real estate
challenge than hotel chains that "only" operate in portfolio since entering the European market?
In this context, Germany plays one of the most
Germany. Our business unit with the other core important roles for us. With a hotel share of around We have a healthy portfolio of hotels in primary and
markets Italy, Austria, Switzerland, Spain, Poland and 65%, Germany is our largest market. We are currently secondary cities. This is of great advantage. In major
Hungary is still facing a very hard time. The various represented at 59 locations - from Aachen to metropolises such as Berlin, Barcelona, Milan, Rome,
lockdowns are not making it any easier. Wolfsburg. Germany has proven to be more resilient Warsaw, but also in secondary cities such as
than the other European countries. We will continue Dortmund, Verona and Bilbao, we convince guests
“We are currently in a position
where we do not have to to expand here and also tap into new segments. with our location concept, focusing on short
announce any compulsory Have you succeeded in closing ranks with your distances to public transport, airports, trade fairs,
redundancies for operational owners? sights, culture and shopping opportunities. We are
reasons.“ Leonardo Hotels belongs to the Fattal Hotel Group, sure that traveling - albeit in a changed form - will
34 |Interview – Yoram Biton
come again. The Corona experience has also taught focusing on healthy and gradual expansion in Europe.
us that we should focus more on B and C locations.
"Our motto: Leonardo has come
Smaller destinations with a large regional draw have
to stay."
developed a special charm. In terms of our brands,
for example, we were able to achieve good Even this year, we are holding on to five new
occupancy rates with our lifestyle brand NYX Hotels openings - in Warsaw and Barcelona, as well as
as well as our boutique hotels even during the crisis. Eschborn, Nuremberg and Augsburg. We already
have further projects in the pipeline up to 2024 in
What perspectives do you currently see for the
Hamburg and Berlin. Securing liquidity will be more
market in 2021?
important than ever for us. We are pursuing an
The economic impact of the Corona pandemic has of
expansion strategy that is diversified and based on a
course also affected hotel properties, which were
good mix of owned and managed hotels. An
facing massive losses in revenue and value as well as
extensive, dynamic offering - supported by our multi-
investment uncertainty. The length of the crisis is
brand strategy, even at a single location - has
decisive for how the value of the property will develop
successfully established itself, even in times of crisis.
further. However, Germany is more than ever
We will continue to build on this. As travel behavior
perceived as a "safe haven" compared to other
will continue to change due to the Corona pandemic,
investment locations. We expect and hope for a
we are also looking at new segments with new
catch-up effect in the market depending on the length
concepts. In five years, we will certainly have
of the crisis and a well-founded exit scenario
achieved our goal of having an exclusive selection of
supported by politics.
resort and leisure hotels in our portfolio. In Israel, we
Where do you see Leonardo Hotels in five years? are already the market leader in this area and can
Since our launch in Europe in 2006 we have been draw on the expertise of our parent company.
35 |Contact
Andreas Ewald
Managing Director
E-Mail: andreas.ewald@engelvoelkers.com
Telephone: +49 40 368810150
Constantin M. Klementz
Director
Diese Fläche mit einem Bild überlagern
E-Mail: constantin.klementz@engelvoelkers.com
Telephone: +49 40 368810163
Roman Tkaczenko
Manager
E-Mail: roman.tkaczenko@engelvoelkers.com
Telephone: +49 40 368810164
36 |Disclaimer and Imprint 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. 37 |
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