hospitalityInside INVESTMENT BAROMETER Autumn 2019: Entering the downturn with exhilaration? New concepts are needed
For a while now, numerous voices have warned of a deterioration in sentiment on hotel markets. The hospitalityInside INVESTMENT BAROMETER survey conducted at the Expo Real provides solid confirmation of these forecasts. For six years now, HospitalityInside and Union Investment have asked industry insiders about their own situation and for their expectations for the next six months. The results are then used to compile the INVESTMENT BAROMETER. All indications point downwards.
The INVESTMENT BAROMETER Index 2019 slipped by 7.2% year-on-year, for the first time falling lower than the 3,500-point threshold. All five sub-indicators are down, with three of them even reaching new lows.
The Expectation Index fell most sharply, down 11.5% on the previous year. It relates to the performance of the company’s own business and has declined for the third year in a row. When asked about the current market situation in respect of their own company (Business Index), the decline is still moderate, down only 1.2% on the previous year, although this is the fourth time in succession that the index has fallen.
The Development Index also continues the decline it began in 2017, down 7.1% on the previous year. A similar picture emerges in the Operations Index for the industry’s revenue expectations: It has been falling since 2015, and this time fell 9.4% on the previous year.
Current figures are back to their 2013 values, which was not a bad year. Back then though, the industry was on its way up. Today, the wind blows head on and the first ones are already beginning to draw in the sails. Consolidation and modest growth should become the guiding principle in the coming years.
Meanwhile, additional room capacities continue to enter the market. The survey identifies investment pressure from the capital market as the main reason for this (74% of responses). As the hotel experts surveyed see it, the declining appeal of other asset classes (42%) is contributing to the continued growth in supply.
“Despite the deteriorating mood, demand for hotel real estate remains unbroken. A special and selective strategy is needed to prepare for possible future setbacks today,” says Andreas Löcher, Head of Investment Management Hospitality at Union Investment.
When asked about the trends that promise new income or which at least stabilise business, the hotel experts repeatedly cite mixed-use, i.e. concepts that cleverly combine the hotel with other uses (46% of responses). Hotels with food & beverage offers and hotels with a good neighbourhood story could also be among the future winners (36%) as well as hotels with co-working or co-living components (31%), survey respondents noted.
Extracts of the new results are published on the Union Investment website (www.union-investment.de/realestate) and on hospitalityInside (www.hospitalityInside.com).