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Hotel Construction Pipeline Europe

With the pandemic having had a significant impact on construction timelines over the past 18 months, Europe is set to see a bumper number of new openings through 2022 according to the latest data from Tophotelprojects.

A total of 1,793 projects are in progress across the continent, amounting to 305,387 rooms, 39% of which are slated to come online before the end of 2022. The UK maintains its position as the most active country in Europe, with five of its cities making the top ten. London will see new offers from CitizenM, Radisson Red and Hilton’s Curio Collection, while Manchester will get a Residence Inn from Marriott and a 275-key newbuild from Leonardo Hotels.

Elsewhere in Europe, Germany’s pipeline is being driven by projects in Hamburg and Berlin – such as the 750-key Estrel Tower, billed as the country’s tallest hotel. And across the border in France, Paris is picking up pace thanks to the likes of a 700-key H Hotel due to open in 2023, as well as a number of new ventures from Accor.

Amongst the largest projects in the pipeline across the continent is a 1,700room luxury hotel at Lamda Development’s mixed-use Ellinikon project on the Athens Riviera, where Kengo Kuma & Associates and Foster + Partners are responsible for creating new architectural landmarks.

Tophotelprojects is a data service to support the design, build, furnishing and operation of hotels worldwide. For more information visit: www.tophotelprojects.com

TOP CITIES

LONDON Projects 102 Rooms 17,538

DUBLIN Projects 53 Rooms 7,463

PARIS Projects 32 Rooms 6,398 HAMBURG Projects 28 Rooms 5,740

MANCHESTER Projects 27 Rooms 5,019

BERLIN Projects 24 Rooms 5,752 LIVERPOOL Projects 24 Rooms 3,411

EDINBURGH Projects 23 Rooms 3,823 GLASGOW Projects 21 Rooms 3,766

VIENNA Projects 20 Rooms 3,423

TOP COUNTRIES

1

Projects Rooms

UK 431 63,638

Projects Rooms

6

SPAIN 67 12,638

2

GERMANY 357 56,085

7

AUSTRIA 67 8,922

3

FRANCE 111 18,129

4

ITALY 87 13,795

8

POLAND 60 11,749

9

SWITZERLAND 58 7,284

5

IRELAND 76 10,976

10

RUSSIA 50 11,072

CONSTRUCTION PHASE

Of the 305,387 rooms in the pipeline across Europe, 41% (733 projects) are in advanced stages of planning, while a further 35% (609 projects) are currently under construction. A total of 28,145 rooms are in the pre-opening phase and expected to debut in the coming months.

VISION

Projects 39 Rooms 5,981

PRE-PLANNING

Projects 225 Rooms 40,407

PLANNING

Projects 733 Rooms 124,664

CONSTRUCTION

Projects 609 Rooms 106,190

PRE-OPENING

Projects 187 Rooms 28,145

GROUPS AND BRANDS

Accor takes the top spot by number of projects in the pipeline according to Tophotelprojects data, though Hilton Worldwide has more rooms, totalling 20,198 in comparison to Accor’s 19,728. The Mercure and Novotel brands are driving growth at Accor, while Hilton continues with significant expansion of its upper-midscale Hampton brand.

115 Projects

113 Projects

81 Projects

74 Projects

65 Projects

BRAND

Hampton by Hilton

Radisson Blu

Mercure

Hilton Garden Inn

Radisson Red

Novotel

Hotel Indigo

Holiday Inn

Intercity Hotel Hilton Hotels & Resorts

YEAR OF OPENING

PROJECTS ROOMS

41 6,929

26 5,309

22 2,792

21 3,467

18 3,860

18 3,180

17 2,165

16 3,620

16 3,530

15 4,642

2021 (10%) 2022 (29%) 2023 (18%) 2024 (9%) 2025 / UNCONFIRMED (34%)

The intelligence source for the hotel investment community

Investors back British bounceback

UK investor Henderson Park has made a big bet on the recovery of British city hotels, buying a portfolio of 12 Hilton-branded hotels in a GBP555m deal.

The properties were bought from Israelibacked LRC, which purchased the hotels in 2018, combining 23 properties under the Amaris Hospitality business, and seven Hilton-branded properties from Oaktree Capital Management. The package includes one Hilton-branded hotel, in Edinburgh, one Garden Inn in Dublin, and ten Doubletree properties.

The acquisitions will add to Henderson Park’s existing links with Hilton in the UK. The company bought the Hilton Metropoles in London and Birmingham in 2017 with a GBP500m deal that signalled its entry into the UK hotel market.

Nick Weber, founding partner of Henderson Park, explained the rationale for the acquisition: “We see a massive recovery coming and so our bet on the Hilton portfolio is on phenomenal assets. We feel we are buying it at a very attractive price - not a distressed price. We believe we are playing into the recovery that we are seeing in our other assets.”

At the London Hilton Metropole, Henderson Park said its current bookings for meetings and events in 2022 have risen to effectively match forward bookings two years ago.

Henderson Park is not the only investor backing a solid future for UK hotels. Also actively buying in the last few months is Castleforge Partners, which so far this year has acquired three properties. It kicked off in May, purchasing Bruntsfield Hotel in Edinburgh, followed the next month with the acquisition of the Hilton in Cardiff from Tonstate. Most recently, the group added Crowne Plaza Royal Terrace in Edinburgh.

Matt Lederer, hotel acquisitions director at Castleforge, told Hotel Analyst that his team is looking to pick up 10 or more hotels by the end of 2022, and is also seeking out opportunities in some mainland European markets. “We’re big believers in the long-term travel trends we were seeing pre-Covid,” said Lederer, who pointed to the 63% growth in international tourism over a decade. “While Covid has interrupted that, it’s a relatively short interruption.”

He also said that measuring the rebound against a return to 2019 levels of business “in some ways, is the wrong question. Ultimately, the recovery is not going to be uniform.” Instead, a granular approach searches for suitable assets in individual markets that have strong fundamentals.

The fact that two of the investor’s first buys are both in Edinburgh was, he said, simply down to opportunity - albeit “it’s one of the strongest UK markets outside London, with a 60/40, leisure/corporate split, and we’d buy again in Edinburgh.”

Lederer is working closely with operating partner Axiom Hospitality, both on preacquisition work and in planning rolling refurbishments of properties which he said are already promising to deliver “really positive numbers right to the end of the year”. Castleforge is eyeing a five-year hold for their hospitality assets - “but that’s not to say it won’t change”.

The Henderson Park deal looks set to seal the demise of Amaris Hospitality, a vehicle established by Lone Star as a hotel management platform in 2015. The portfolio included properties from Puma, renamed The Hotel Collection, joined in 2015 by the Jurys Inn business, bought for GBP680m. Also added were 21 Mercures, 19 Thistle hotels and three Hiltons.

At its peak, Amaris grew under Lone Star’s ownership to a portfolio of 89 properties, with a senior team including veteran John Brennan, and former Travelodge CEO Grant Hearn overseeing a shuffling of the brands that saw Jurys Inn properties in key city locations convert to Hilton flags, and Thistles convert to Accor brands. Jurys Inns in Chelsea and Islington were also converted to Doubletree in a bid to win more international guests from the brand, while the 211-room Edinburgh Carlton switched to Hilton in 2016 following a GBP17m refurbishment.

The Hotel Collection properties were disposed of individually. In 2017, the Jurys Inn business and assets were sold to Israeli operator Fattal and Scandinavian landlord Pandox in an GBP800m deal. And in 2018, LRC acquired the remaining Amaris business for a rumoured GBP600m, allowing Lone Star a profitable exit.

Following the disposal, LRC’s Amaris business is left with 17 Mercure hotels and one Ibis-branded hotel, all located around the UK.

HA PERSPECTIVE

By Chris Bown: It feels as if the smart money is starting to move in the UK hotel space. The deals being done are not distressed - though the sellers may, perhaps, have a strong reason to accept a sensible offer. Rather, the buyers are convinced that the right sort of hotels, in the right locations, will do well from this most curious of upturns.

Lederer’s point about worrying over the wrong question is an interesting point. The Covid lockdown delivered enforced working from home, and its legacy is still working through. We all breathed cleaner air, too - so it looks as though journeys will be fewer in future. But the flip side may be an intensive visit to the office for a couple of days a week; or a threeday business trip, rather than three one day trips. In both those cases, mid-market city hotels could end up being a net beneficiary.

Looking back at Lone Star’s Amaris adventure is fun - its deals gave us plenty to report on, as it picked up, repositioned and disposed of a raft of UK hotels, some of which had already kept agents in work amply over the previous cycle. It also looks to have

done quite well out of the process. Not everything went so smoothly, however - Shearings being one that they were left holding as Covid struck the sector.

And so to what’s left from Amaris. Will LRC go again into the UK hotel market? Or will they be able to exit the remaining portfolio tidily, as another investor sees an opportunity?

HA PERSPECTIVE

By Andrew Sangster: The big risk in the recovery remains Covid. Although it is increasingly clear that Covid is an endemic disease that we have to learn to live with, there remains pressure on governments to retain emergency restrictions, particularly on international travel.

A locus of this pressure is coming from what can broadly be described as the health lobby. The British Medical Association, the trade union for doctors, is demanding the return of face masks and social distancing measures. It accuses the UK Government of being “wilfully negligent”.

The stridency of these appeals is a challenge for the Government and if the data on infections and hospitalisations continues to worsen, it will be a surprise if there are no further concessions.

UK infections are now above 50,000 a day and health secretary Sajid Javid is warning that they may soon rise above 100,000. The UK Government’s current position is that restrictions will only be introduced if the National Health Service comes under unsustainable pressure.

Right now, the pressure looks bearable. The vacancy rate at NHS hospital beds is currently 5.5% and Covid patients occupy less than 5% of the occupied beds. And even here there is a cause for scepticism on the pressure: evidence shows fewer than half of current Covid admissions are caused by Covid. The majority of Covid admissions are for people going into hospital for other reasons – an accident or other disease – and are subsequently found to be infected.

The track record of the scientific forecasting of Covid is poor. So poor that it makes economic forecasters look good. For example, the UK Government presented scenarios from four groups of experts almost a year ago for the then forthcoming winter. All these expert predictions significantly overshot the reality – which was still bad at more than 1,000 deaths a day at its peak. Thus, it is possible for the Government to ignore expert advice, despite pledging to always be led by it.

For investors in hotels and other operational real estate that is impacted by social distancing measures, it is going to be a nail-biting winter. While Covid is endemic, we have to take every opportunity to lobby against social distancing restrictions becoming endemic too. Otherwise, the recovery will die out before it takes hold.

Accor’s new lifestyle

Accor has completed the acquisition of Ennismore, bringing its lifestyle and boutique brands together in a new division that is set to operate at arms-length from the main business.

The deal sees the Accor brands, including several acquisitions and co-investments from recent years, combine with those of the Ennismore business, blending hotel offerings with restaurant and nightlife brands.

The transaction completed by way of an allshare merger, splicing together the Ennismore business with Accor’s lifestyle business. Accor has two thirds of the new entity, which retains the Ennismore name, with Ennismore founder Sharan Pasricha holding one third. Together, the aim is to draw on Ennismore’s brand building and creativity, while Accor will contribute the group’s proven experience in growing brands to scale, and in effective distribution.

Ennismore takes control of 14 brands, including 21C Museum Hotels, 25hours, Delano, Gleneagles, Hyde, Jo & Joe, Mama Shelter, Mondrian, Morgans Originals, SLS, SO/, The Hoxton, Tribe and Working From. Currently, there are 87 operating hotels, and more than 140 in the signed pipeline, along with over 150 restaurants and nightlife destinations.

The new Ennismore lays claim to being the largest and fastest growing lifestyle hospitality company. Pasricha commented: “I couldn’t be more excited to bring together our unrivalled portfolio of brands in this new entity, and share the reins with my longtime friend and now coCEO, Gaurav.”

Pasricha started Ennismore in 2012, persuading his father-in-law to back his Hoxton brand by acquiring the first hotel site in Shoreditch. He transformed the property, then took the brand on the road, adding sites in London, the US and mainland Europe. In 2015, he branched out by purchasing Gleneagles in Scotland, turning that around and planning brand offshoots. Along the way, a number of other hotel, restaurant and nightlife brands have been born and tested in the market.

The leased assets within the Ennismore portfolio are being shifted into a separate vehicle, created with a fund managed by Keys Reim. Of this, Keys will hold 51% with Accor and Ennismore the remaining stake, holding 24.5% each.

The fund manager, founded in 2011 and based in Paris, specialises in creating alternative investment funds for sophisticated investors. The group has already backed several hotel developments across France, as well as the UK’s first Jo & Joe, converted from a historic cinema in London.

Established as a stand-apart business, Ennismore will retain its own in-house creative studio, a platform for developing restaurants and bars, and a digital innovation lab.

Speaking recently to Hotel Analyst, Gaurav Bhushan said the deal had been born only due the pandemic, with Pasricha joining him for dinner after the first lockdown eased. Unencumbered by a diary full of meetings and flights, the pair found time to chew over Ennismore’s challenges of scaling up its exciting brand ideas, and turning a profit - and found a way for Accor’s infrastructure to lean in. “It would never have happened if life had been normal.”

Several of the Accor brands that will be passed into the custodianship of Ennismore were partly owned. Accor has spent close to EUR500m buying out the remaining stakes of businesses including the 50% of SBE it did not own, while also settling a buyout deal with the founders of hotel brands 25hours and Mama Shelter.

Commenting at IHIF in Berlin, Accor CEO Sebastien Bazin spoke of the opportunity that the higher end of the portfolio promises to deliver, saying he expects the group’s luxury brands to soon account for around 30% of group revenues. Luxury resort brand Rixos is gaining traction, and he said he is most excited by the potential of Orient Express, with its first hotels in Rome and Istanbul.

At Ennismore, he promised: “We’ll have 99 hotels by the end of the year, and 120 more signed in the next 18 months. There are another 80 in negotiation between 18 and 36 months, and 150 standalone bars and restaurants.”

Bhushan said several brands have substantial growth potential, noting Hoxton could become a global brand, easily three times its current size. He also expects several of the Ennismore restaurant concepts to be a good fit for other Accor hotel properties outside of the Ennismore portfolio. A typical lifestyle hotel’s food and beverage offering can attract lots of business external to hotel guests, delivering around 45% of total revenues from a site, rewriting the rules about traditional hotel restaurants and bars.

HA PERSPECTIVE

By Andrew Sangster: We’ve previously written about this deal and smart move to form a standalone company – based in London – to lead growth in this segment. What news of the completion of the deal offers is a chance to reflect on how Accor as a whole has changed in response to these trends.

Mostly, it has been for the best. There have been a few missteps along the way, notably in the tech and distribution space, but Accor looks a very different company than it was a decade ago.

Lifestyle hotels – sometimes called boutique – were born from the same disruptive forces that created the sharing economy and the emergence of hotel-adjacent accommodation offers like hostels and extended stay.

The essence of this force is in the tension between service and hospitality; the difference between the top-down, supplier driven star-rating classification and the bottom-up, demand-driven provision of customer needs.

Prior to these changes, hotels had been largely a business-to-business transaction. They were sold more as a commodity, with the branding serving to reassure about basic standards.

Lifestyle went straight for the consumer, selling on emotion rather than facilities. The advent of the sharing economy took this to the next stage, introducing notions of experience, sense of place and purpose.

Just as it became apparent that hotels were not just sold to anonymous suits, the needs of families and youth groups were increasingly being catered for. Apartments and hostels came in from the cold to be part of the accommodation mainstream.

Accor has been at the forefront of recognising these changes, but the most important impact has not been with the lifestyle or hotel-adjacent products themselves, rather in the core of Accor’s offer – Ibis and Novotel. It is here that the reinvention will be most transformative. The new look Ibis is part of this change and so far is proving to be a rather compelling proposition.

Travel innovation crescendo

A new breed of tech travel start-ups is successfully tapping funders, in a bid to accelerate their development into a postpandemic travel landscape.

New arrivals to the space such as Spotnana promise to break down old barriers to improve efficiency across the travel space, feeding into an area where others are already testing artificial intelligence and machine learning.

Recently, the UK Short-term Accommodation Association revealed it is pushing to integrate member inventory into the GDS, breaking another barrier to ease corporate bookings.

And consumers are clearly looking for simple, on-the-move solutions, as witnessed by app download volumes. Analysis by sector specialist SensorTower recently revealed that app download volumes are already ahead of 2019 levels, based on US market figures.

Hopper was the most downloaded app, followed by Booking, Expedia, Priceline and Hotels.com. Faced with such metrics, there are plenty of investors ready to back innovation in the travel space, as witnessed by two recent deals.

One potentially disruptive tech company, Spotnana, has just attracted a new USD34m round of funding, giving it more than USD40m of development firepower. The startup launched in 2019 and is working on a platform that will help travel buyers and suppliers automate key administrative parts of trip preparation.

CEO Sarosh Waghmar comes from the travel industry, and told TechCrunch that he is working to fix the “highly broken and highly fragmented” sector. “Travel is a USD1.4 trillion industry and just corporate travel is growing 5% to 6% each year, but accounted for USD700 billion of that last year in spite of the pandemic.”

The company has been piloting its platform with 50 corporate travel customers, and has already grown to more than 120 staff.

Steve Singh, former founder and CEO of corporate expense and travel software company Concur, is Spotnana’s chairman of the board and describes the company’s offer as “AWS for the travel industry.”

In a recent blog, Waghmar commented: “Bad service and high prices are a byproduct by a dated technology stack that hurts travellers and disconnects travel providers from travel agencies. The global travel industry is limited by legacy technology built 50 years ago during the era of mainframe computing. To get around limitations baked into the system, a variety of solutions provide workarounds that cause another set of problems to arise.”

Spotnana has been built as an open platform, allowing users to get into the software and adapt it as they need. “Our mission is to bring trust and transparency back to travel by creating a perfect experience for travellers from the time they book a trip to when they arrive back home.”

And another tech-led accommodation company that has successfully tapped fresh investment is US-based Blueground. The company has drawn in USD180m of funding to help drive growth in its rental business.

It concentrates on minimum monthly rental periods, and currently has 5,000 apartments in 15 global cities. USD140m was raised from Geolo Capital, VentureFriends and Prime Ventures, alongside a USD40m debt facility from Silicon Valley Bank.

Blueground signs flexible long-term leases with landlords, promising a minimum rental guarantee, and takes on the risk of maintaining occupancy with shorter lets. During the pandemic, the company said it managed to maintain a minimum 92% occupancy. It claims it “recently reached cash flow positivity”, and is “now back in hyper-growth mode” in a sector where it claims leadership in the monthly to yearly furnished rental space.

“Blueground is uniquely positioned to address the growing need for flexibility in real estate as companies continue to delay return-to-office mandates,” said John Pritzker, Geolo Capital’s founding partner and director. “There’s an immense opportunity here; and with Alex and the Blueground team as the clear leaders in 30+ day stays, we’re confident that Blueground will continue to see success.”

Geolo has long had a commitment to the accommodation sector, investing in growing a portfolio that brought together Alila, Commune Hotels and Destination Hotels before selling to Hyatt in 2018. Earlier this year, the company sold the Ventana Big Sur resort to Hyatt in a USD148m deal.

Alongside physical assets, Geolo has also backed a number of tech businesses in the travel space, including WhyHotel, mini apartment designers Ori Living, and rental management software developer Livly.

HA PERSPECTIVE

By Chris Bown: Prop tech comes in many forms, it seems. While Spotnana quite clearly is working on a technological solution to what its founders see as a broken part of the travel data chain, Blueground is altogether different. So, we look forward to seeing what Spotnana can come up with - we’d all love travel booking sites and systems to be a much more seamless experience.

And then there’s Blueground. A tech business? The cynics among you might compare its model to WeWork, renting long and subletting short. Or, in the overnight accommodation space, Sonder. Blueground has a major property lease liability, and so the actual tech bit only seems to deliver around efficient asset management, operations and distribution - all areas where high efficiency is highly valuable, but areas that plenty of others are competing in, too.

HA PERSPECTIVE

By Andrew Sangster: There is now a widespread view that the impact of Covid and associated lockdowns has been to pull forward what was happening preCovid, maybe five or even 10 years. This has created a culture which favours start-ups. The time that incumbent – often called legacy – businesses have to react is much less.

Venture capitalists are particularly excited about the opportunities in Europe across all industries, including travel. McKinsey says there are three factors in favour of European start-ups right now: Europe offers better value than the US; Europe has a mature funding market alongside deep pools of business expertise to provide talent; and Europe’s economies need innovation, which is fertile ground for the nimble and unencumbered.

Travel remains a messy, fragmented marketplace that is ripe for disruption. Lots of people talk about disruption, but very few actually deliver it. I’d love to be able to tell you where this disruption is going to occur but I don’t know – if I did, there are better ways to make money out of the knowledge than writing about it.

What I do know is that the conditions to create truly impressive disrupters are better than I have ever known them in my three-plus decades reporting on this sector. The next few years are going to be fun.

Hotel Analyst is the news analysis service for those involved with financing hotel property or hotel operating companies.

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Covid-19 Update: ADR recovering faster than occupancy

Momentum has continued to build in Europe’s hotel performance recovery, even though the summer months did not meet expectations.

The UK had led occupancy recovery since restrictions were lifted during the spring, but most recently, Turkey posted the highest index to 2019 (90.5) with 67.1% absolute occupancy. At the same time, Turkey’s ADR of TRY890.41 indexed at 172.4. The UK’s 72.1% occupancy indexed at 86.7 in September, while the country’s ADR of GBP100.08 indexed at 98.3.

Russia (index: 104.6) and Italy (index: 100.5) also surpassed their 2019 comparables in ADR, while occupancy indexed at just 82.8 and 71.8 respectively.

When looking at different regions, Northern Europe’s leisure markets saw strong performance during summer, driven by domestic demand, while Southern Europe struggled because of travel restrictions. The Turkish Riviera and Canary Islands posted September occupancy indexes of 85.4 and 74.2 respectively. The Balearic and Algarve came in with an index of just 64.3. ADR in these markets however was well above 2019 levels, most notably in the Turkish Riviera (index: 223.9).

Looking ahead, leisure markets should continue to drive performance as consumers swap international breaks for staycations. There has, however, been momentum in major markets like London, and there should be more balance once international arrivals and business travel pick up.

STR provides premium data benchmarking, analytics and marketplace insights for global hospitality sectors. For more information and to subscribe visit: www.str.com

Performance Data September 2021 vs 2019*

(year-over-year % changes and absolute values)

NETHERLANDS Occupancy 36.7% to 51.2% ADR 25.9% to EUR99.42 RevPAR 53.1% to EUR50.91

UK Occupancy 13.3% to 72.1% ADR 1.7% to GBP100.08 RevPAR 14.8% to GBP72.14

BELGIUM Occupancy 41.6% to 46.7% ADR 21.0% to EUR98.16 RevPAR 53.9% to EUR45.82

PORTUGAL Occupancy 39.0% to 52.8% ADR 3.2% to EUR124.07 RevPAR 40.9% to EUR65.53 FRANCE Occupancy 18.9% to 63.0% ADR 8.4% to EUR130.89 RevPAR 25.7% to EUR82.42

SPAIN Occupancy 31.0% to 58.7% ADR 7.4% to EUR113.85 RevPAR 36.1% to EUR66.79

GERMANY Occupancy 27.2% to 58.0% ADR 18.0% to EUR95.51 RevPAR 40.3% to EUR55.44

POLAND Occupancy 24.1% to 60.0% ADR 12.4% to PLN290.63 RevPAR 33.5% to PLN174.38 RUSSIA Occupancy 17.2% to 62.2% ADR 4.6% to RUB6077.80 RevPAR 13.3% to RUB3779.39

ITALY Occupancy 28.2% to 58.4% ADR 0.5% to EUR169.15 RevPAR 27.9% to EUR98.73 TURKEY Occupancy 9.5% to 67.1% ADR 72.4% to TRY890.41 RevPAR 56.1% to TRY597.51

*Due to the steep, pandemic-driven performance declines of 2020, STR is measuring recovery against comparable time periods from 2019