European hotel real estate market expects 3.1 billion euro turnover

Despite the winds of war and economic crisis, tourism is in full recovery in 2022 as witnessed by packed trains and planes. At the end of the year, it could even exceed what happened in pre-pandemic in 2019 on a global level.

Along with tourism, the hotel real estate sector is also growing, which was already in a positive phase before COVID. World real estate investments in 12 months have more than doubled compared to 2020, reaching almost 70 billion euros, with differing interests in terms of relative location, urban areas, holiday resorts, and level structures.

In Europe, the hotel real estate market closed 2021 with a turnover of 21.2 billion euros and is expected to rise to 26.6 billion in 2022. A trend is confirmed also in Italy with a 2021 turnover of 2.5 billion euros, which is expected to increase in 2022 to 3.1 billion.

These are some of the data from the 2022 report on the hotel real estate market, presented in Milan during the Hospitality Forum 2022, organized by investor Castello SGR and Scenari Immobiliari.

“After 2021 in which a recovery path has been glimpsed, the objectives of flexibility and versatility will be the driver of 2022, and the next 2 years, because they respond to the demand of the ‘new traveler’ – unorganized worker, frequent touring, seasonally adjusted hiker. A widespread increase in overnight stays, record occupancy rates for certain periods of the year, the development of the ‘leisure’ segment, the concomitance of business and pleasure trips, the multiplication of opportunities for short holidays to recover part of the time for.”

“So they are elements that bring optimism.”

“However, some elements remain that could hurt the sector, such as possible new waves of infections, increase in inflation, cost of energy and increase in accommodation prices, shortage of labor, and slow distribution of tourism in the fairs and meetings. The challenges are, therefore, numerous; the fundamentals that represent a guarantee of a safe and profitable market remain unchanged, despite the events of the last 2 years. The dynamics are disturbing, but the economic segment and the real estate assets have intrinsic characteristics to support the recovery,” said Giampiero Schiavo, CEO of Castello  SGR.

“The trend of the tourism and hotel market in Europe and Italy shows great vitality and this is undoubtedly great news. We operators, together with national and local institutions, have the duty to accompany the recovery by responding to the new needs of travelers and offering them a more valuable experience. Only in this way can our country remain at the center of the main world destinations. The greater commitment of all market players will be placed in further strengthening the seasonal adjustment and in making attractive – also thanks to an improvement in services and infrastructures – not only the big cities and the most iconic places but all the Italian regions, until a virtuous circle is established.”

The end-2021 scenarios have led to the hypothesis that international tourist arrivals could grow up to 78% during 2022, with final levels still below what was recorded in 2019, before the pandemic (about 60%). After this first quarter, the estimates have been revised upwards, assuming that tourist arrivals in 2022 may constitute about 70% of those in 2019, or about 1.05 billion. 2022 is, therefore, considered to be a year of recovery in international tourism, and this recovery of the sector is assumed to be driven for the most part by domestic tourism.

It is, therefore, estimated that the return to pre-pandemic levels of 1.4 billion arrivals can be achieved between the second half of 2023 and the beginning of 2024, while the overcoming of the 1.8 billion arrivals quota, should be between the end of 2030 and the beginning of 2031. Furthermore, it is assumed that in the following year the threshold of 1.9 billion arrivals in the world can be exceeded.

In Europe, investments in 2021 involved accommodation facilities for a total real estate value of €16.8 billion. The main transactions involved properties of different levels, from 2 to 5-star luxury, with a majority share represented by 4-star hotels.

In Italy, the transactions recorded in 2021 and the first months of 2022, the interest of investors, including foreign ones, were in excellent and often iconic locations. The operations involved approximately 76 3-, 4-, and 5-star accommodation facilities, for a total of over 11,400 rooms.

For the current year, expectations are positive – European real estate turnover will close 2022 with an increase of just under 30%, the national one with comparable growth. However, the complex macroeconomic situation leads to greater caution in future development forecasts. We will have to wait until the first months of 2024 for volumes to stabilize on the highest levels reached in the past.

In Europe, the turnover produced by the European tourism industry, and in particular by the hotel industry, depends on the internal demand that supported the sector not only for primary holiday locations but also for secondary ones, also considering hotel and extra hotel supply. The generalized expectation of a decline in prices, even for good quality real estate assets, is ignored at the moment and today the gap between opportunistic investor pressure and the value of assets is still wide, with some of Central Europe characterized by scarce dynamism deriving from the resistance shown towards the new demands.

In 2021 in Italy, the hotel real estate market shared the top steps of the podium with the logistics sector for increases in investments, thanks to a turnover that increased by over 65% compared to 2020. The variation, which appears more marked because it is confronted with 12 months of important difficulties, brings the sector’s performance closer to 2019, during which the highest levels of investment were reached. For 2022, significant growth in turnover is expected, equal to 25%, which will bring the indicator to align itself with 2018, while to overcome the results of 2019 it will instead be necessary to wait until 2024.