Hotel Sector Attracting new Investors


Photo by maziarz /

With positive indicators in the Hungarian and CEE hotel and hospitality markets, more institutional European investors such as Deka and Invesco are looking at the possibilities in this sector.

The Hotel Gellért.

Hotel is no longer regarded as a Cinderella to the more established and increasingly competitive office and industrial markets. Hotel and tourism offers continued growth according to most studies, in contrast to concerns about the long-term health of the retail sector.  

Ever-more sophisticated products are needed to meet the needs of guests and more travelers see the Central European region as a tourism destination. A growing number of investors are employing hospitality experts and consultants in reaction to the perceived complexities of the hotel sector in comparison with, for example, office where established investors tend to have more experience and expertise.

From the perspective of hotel operators, they are able to sell off the real estate and concentrate on operations. As with Hungary, the trend is for the larger funds to make acquisitions in the CEE capital cities. However, all markets in the region have a common drawback: a limited supply of investment grade assets of the required ticket-size.

“Hotels are currently moving from alternative to mainstream investments as investors get increasingly comfortable with the CEE becoming a maturing hotel market,” comments Bořivoj Vokřínek, head of hospitality research for EMEA at Cushman & Wakefield.

In the latest investment transaction, the Hungarian-American owned investment manager Indotek has purchased the Art Nouveau, 230-room Gellért Hotel overlooking the Danube.

The fund plans to refurbish the landmark building and upgrade the hotel from its current 4-star status to 5-star, for which the new owner is looking for an international luxury branded hotel operator. Indotek has diversified investments across the different market sectors, notably in the redevelopment of value-add investments. The Gellért thermal baths is not part of the deal.

CEE Foothold

Last year the established cross-border investor Starwood Capital purchased the Sofitel Budapest Chain Bridge for EUR 75 million. Starwood see the “sale and management-back transaction” for the 360-room hotel as providing a foothold in the CEE hotel market.

According to Marius Gomola, managing director of Horwath HTL Hungary, the major problem with the development of the hotel investment market is the limited availability of investment grade stock to meet the growing needs of investors. As a consequence, the number of transactions has been relatively low in CEE in comparison to the potential in the hotel and hospitality sectors.

“Despite this low availability of investment grade assets, established European investors such as Deka and Invesco have become increasingly active in the hotel sector to the background of growing tourism visits and concerns regarding the retail sector,” Gomola said at the HOTCO - Hotel Investment Platform CEE & Caucasus conference in Budapest earlier this year. The annual event is organized by Horwath HTL Hungary. Gomola estimates that there were 520 hotel investment transactions between 2009-2018.

Frank Hildwein, head of hotel acquisition and sales at Deka Immobilien, explains: “We are core investors and it is not too easy to find the right assets in CEE of EUR 30 million-35 mln upwards, and we concentrate on stable jurisdictions such as Poland, Czech, Hungary and the Baltics.”

David Kellett, senior director of hotel transactions at Invesco, sees the best options in assets of EUR 50 mln-100 mln plus, of which, again, there is limited availability. The company is concentrating on the key CEE cities of Budapest, Prague and Warsaw.

Budapest is regarded as part of a Central European “golden triangle” of Budapest-Prague-Vienna by many hotel investment analysts. Further, the positive hotel market data and the large pipeline is expected to provide opportunities for investors.


In a notably significant CEE hotel transaction the Prague Intercontinental has been purchased for EUR 235 million, which means that its value has tripled in the last 12 years. Gomola described this as the largest ever single asset transaction in CEE at the Prague Property Forum by Portfolio.

In Bucharest, the Lithuanian Apex Alliance has received three concrete bids from Middle East investors for the Hilton Garden Inn, which is being offered for a reported EUR 43 mln. An initial interest in the project came from as many as 30 companies. This income from the deal represents double the initial investment in the project that was completed 18 months ago according to the vendors.

“There are still large amounts of capital looking for healthy returns and hotels in CEE offer superior yields over many other regions in Europe, or indeed other asset classes,” comments Vokřínek.

Cushman & Wakefield estimate the CEE hotel investment volume for 2018 at EUR 800 mln. This figure remains relatively modest due to the limited supply of investment grade product to satisfy growing demand from cross-border institutional and listed investors.

“It is exciting to see the evolution of the CEE hotel market with a growing number of sophisticated investors and arrivals of new brands tailoring their concepts to the needs of new generations of travelers: affordable life-style hotels, soft-brands, new generation of hostels and innovative serviced-apartments concepts,” says Vokřínek.

“The relatively low brand penetration across the region provides space for expansion of innovative products and therefore present a tremendous opportunity for the CEE hospitality market to propel itself into a leading position as the most progressive market in Europe,” he adds.

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