Finance for Hotel Investment and Development UK and Continental Europe

Transcription

1 HOTEL VALUES NOW ACROSS THE SPECTRUM Philip Johnston - HarrisJohnston Russell Kett - HVS Finance for Hotel Investment and Development UK and Continental Europe LE MERIDIEN PICCADILLY NOVEMBER 2014

2 Who are we Philip Johnston MRICS Speaker 28 years of industry experience Hotel, Serviced Apartments and trade-related assets 3 bn worth of assets advised on in 2013/2014 Former head of Savills hotels 10 years + Russell Kett FIH, FHOSPA Speaker 40 years of hotel sector experience throughout EMEA Focus on hotels, serviced apartments, resorts, hostels 20 years at HVS valuations, feasibility studies, strategies, operator search Member of global HVS board of directors chairman of HVS London

3 HarrisJohnston HarrisJohnston Niche practice with combined experience of 60+ years in both the hotel and residential sectors Experienced throughout the UK, Europe and APAC Advisors and investors in the buying, selling and appraisal of hotel and residential assets Consultancy advisors to JLL, Savills and Strutt & Parker

4 CONTENTS Presentation 1. UK Regions recovery? 2. London what does the future hold? 3. Values Risen where to next? 4. Europe where s good to invest? 5. Opportunity Sectors which ones? 6. Current Values realistic and sustainable? 7. Biggest Influence what drives value? 8. Summary and thanks - details

5 UK Regions recovery?

6 Regional performance 2014 Regions Occupancy 73% ARR 61 RevPar 45 (up over last 4 quarters) Hot areas: York, Edinburgh, Oxford, Cambridge Cooler areas: Cardiff, Birmingham, Liverpool, Hull 465,000 rooms = 75% of market Values= Sales below build cost

7 Regional performance Historically prior to 2007/08 strong and stable for 10 yrs+ Mid-market tired 3 stars always a problem waiting to happen Budget sector increased sped up process Restructuring essential eg: Project East - 31 hotels- 90m Project Rock 95 hotels- 1.3bn

8 Regional performance Source: HotStat

9 Regional investment indicators Source: Hotstat

10 Regional supply v demand UK Source: STR Global

11 Regional occupancy v ADR UK Source: STR Global

12 Regional occ & ADR per sector Source: STR Global

13 Regional occ & ADR per major city Source: STR Global

14 UK Regions recovery? Leisure Business Yes across all sectors Corporate

15 UK Regions recovery? Viable Two tier market I Distressed

16 Regional recent transactions Date of Sale Property City Rooms Sale Price ( ) Sale Price per Room ( ) Sep-14 DoubleTree by Hilton Hotel Edinburgh City Cent Edinburgh ,270, ,116 Sep-14 The Lowry Hotel Manchester ,000, ,727 Sep-14 Tower Hotel Derry 93 3,500,000 37,634 Aug-14 Fairmont St Andrews Resort St Andrews ,400, ,024 Jun-14 Travelodge High Wycombe Central High Wycom ,000,000 91,667 Apr-14 Grand Brighton Brighton ,000, ,756 Average 27,861, ,821 Source: HVS

17 Case Studies Park Inn PARK INN YORK River frontage Dated Building F/H and L/H Strong demand lower price PARK INN CARDIFF Attractive Building City Centre Freehold Low demand below build price

18 London what does the future hold?

19 London market Strong market at present Occupancy 83% ADR RevPAR 117 Expanding outside Zone 1 Market never really slowed down 3 months? Flag in the map for both operators and investors profit or loss is irrelevant?

20 London market Confidence never really left the sector Increased international investment Occupancy up 2% to 84% ARR down 1% to 140 REVpar up 1 % to 116 Notable Transactions: Kingsway Hall 2014 New entrants: AB Hotels Penninsula Mondarin

21 London Occ v ADR v RevPAR Source: PWC hotel market review

22 London market Olympic hangover shook it off? 250,000-1,000,000 per bedroom 3% - 9% yield Competes with residential and serviced apartments

23 London recent transactions Date of Sale Property City Rooms Sale Price ( ) Sale Price per Room ( ) Oct-14 Travelodge Stratford London ,600, ,333 Sep-14 Hyde Park Hotel London 68 25,509, ,146 Aug-14 Pan Pacific Heron Plaza (site) London ,000, ,526 Park Inn by Radisson Hotel & Conference Jun-14 Centre London Heathrow London ,000,000 80,447 Feb-14 Enterprise Hotel London ,600, ,000 Jan-14 Wyndham Grand London Chelsea Harbour London ,000, ,392 Average 50,284, ,141 Source: HVS

24 Case Study The Stafford Sold per key ( 1 million per bed after cap-ex) Reputedly available 1.5 million per key 2014 Yield 3% CV appreciation 50% in 6 years?

25 Values Risen where to next?

26 Values Risen where? London Difficult to get foothold Pay year 3 money today International safe haven for 5 10 year buyers Regions Go for key cities and put sites together Coastal mix of resi and hotel works well London residential flatlining? London hotels may cool Regionally: buy/develop well = good growth

27 Values Risen why? Banks Lending Interest Rates Cost of money UK vs Overseas buyers Institutions = Investing (Axa, Prupim, Grosvenor) New Money - Sankatay, Cerberus BUT everything is a cycle Alternative use of old stock: Residential Student Serviced Apartments Serviced Offices

28 Values Risen will it last? Another crash? European problem? Asian problem? UK plc strong but not immune Great time to buy but hold 5 years +(as in regions )

29 Values Risen average per key growth

30 Europe where s good to invest?

31 Europe influences Country vs Cities Economy Regional taxes Liquidity Workforce Legal structure

32 Europe reasons for investment Flags in Map Paris Milan Rome Berlin PIGS Changing Lisbon Sun & Snow Spain Greece Malta France

33 European sectors 2014 Source: STR Global 2014

34 Europe reasons for investment Safe Havens Paris Monaco Courchevel 1850 Who buys and owns? HNWI Family/Trusts Brands and Investors

35 Opportunity Sectors which ones?

36 Serviced Apartments 6% - 8% yields Compete in resi and hotel sector 1,000+ psf

37 Distressed Asset Sales all gone? NAMA Good and Bad Banks Build Cost Values

38 Residential Conversion Planning? Central London Townhouses Big upside Highly competitive Risk, Cost & Time

39 Hostels money to be made? Regular Income DWP vs Private I Highly Profitable

40 Current Values realistic and sustainable?

41 Current Values sustainable London Yes as supply is limited Resi sector has huge bearing Affordability as a city is key Move outside Zone 1 Regions Improving Product redefining itself Recent distress the first in 15 years

42 Current Values sustainable Europe More trouble to come Political stability (Ukraine) Banks and Euro an issue

43 Biggest Influence what drives value?

44 Biggest Influence what drives value? Banks/Interest Rates I Foreign Investment

45 Biggest Influence what drives value? Confidence is Key Business Consumer Investors

46 SUMMARY

47 Summary London back and up on 2007 peak Regions recovering but dropped badly Trade overall good corporate and leisure Still fragile and national and world events do have major impact Ebola Ukraine Terrorism Interest rate 10%?!

48 Thank You for listening Any questions? Philip Johnston Director Harris Johnston 25 Grosvenor Street London W1K 4QN Tel Mob Russell Kett Chairman HVS 7-10 Chandos Street Cavendish Square London W1G 9DQ Tel Mob