HVS's London office has published its latest European Hotel Transactions Report, reflecting the single asset and portfolio hotel transactions which took place in 2009. The European Hotel Transactions 2009 report provides an ongoing history of hotel sales from 2000, discusses the largest portfolio and single asset transactions in 2009, identifies the year's top buyers and sellers, and provides a listing of sales that occurred in 2009.

"When taking stock of hotel investments in Europe a year ago, we feared that the 'party was over'", according to co-author Elke Geieregger, a Senior Associate at HVS London. "There were record investment volumes of 18-20 billion euro in 2006 and 2007, but only 6 billion euro in 2008. Owing to deepening economic recession, falling RevPAR and a freeze on lending by commercial banks, 2009 took the hotel investment community into an 'age of austerity'." European hotel investment activity in 2009 fell still further, by around 50%, to just over 3 billion euro: a drop of more than 85% on the volumes of 2007.

Geieregger continues, "Inactivity in the transaction market over the past 12 months has largely been the consequence of four factors. These are the wide bid-ask pricing spread between buyers and sellers, the lack of distressed selling, the difficulties in obtaining new financing for purchases, and the continued decline in the trading environment". With values still at a low point in the cycle and owners unwilling to sell, HVS still expects a large portion of sales to be expected to be bank-driven. They point out that many of the hotels which were sold in the transaction peak of 2006-07 are expected to come up for refinancing in 2010.

"This, combined with banks' wait-and-see approach towards underperforming assets so far, should give rise to distressed assets particularly in the UK and Spain, but far from the flood that most investors have been predicting and eagerly awaiting," commented Saurabh Chawla, Associate Director at HVS.

"In general, the European transaction market is expected to remain under immense pressure for another 12 months or so, until confidence in hotel trading performance is restored, sellers start pricing their assets in line with market value, and banks send sustained signals of support for the hotel sector," Chawla continues. "Our expectation is that hotel investments in 2010 will, at the very least, fare better than they did in 2009, with a more meaningful upturn occurring in 2011."