Germany

Germany: What does Armin Laschet’s leadership of CDU mean for hospitality?

On 16th January Armin Laschet was elected leader of Germany’s Christian Democrats (CDU) party, putting him in a good position to succeed Angela Merkel when she steps down as German chancellor in September. Centrist Laschet, premier of North Rhine-Westphalia state, succeeds Annegret Kramp-Karrenbauer.

Laschet as next Chancellor?

Does this mean Armin Laschet will be the next Chancellor of Germany? “Being the leader of the CDU does not automatically translate to him becoming the joint CDU/CSU candidate for the top job – even though this has been historically the case” says Thanos Papasavvas, Founder and CIO of ABP Invest. “There are still two people who could potentially stop him, both from within the CDU/CSU party: Jens Spahn, who would be going against his word and weakening his credibility with the electorate, and Markus Söder who would attract less appetite from the North and could split the centre vote”.  According to Andreas Löcher, Head of Investment Management for Hospitality at Union Investment Real Estate GmbH, “It is still unclear if Laschet as new head of CDU will also be the favourite as chancellor candidate; I would be more inclined to believe in Markus Söder being the true favourite”. Henri Wilmes, Chief Investment Officer for A&O Hotels and Hostels believes that Laschet “has a 50% chance on becoming the new chancellor on the basis that the CDU/CSU party wins the next elections, with a 50% chance of Söder becoming the candidate for the top job in a CDU/CSU led government.” Papasavvas disagrees: “Unless Merkel were to personally intervene and push for Söder, we see Laschet as the next German Chancellor in September”.

Impact on business

If it were to happen, what would Laschet’s election as Chancellor mean for business in Germany and Europe? “Leaders such as Merkel are extremely rare - and although Laschet pursues the same centrist liberal policies, he is unlikely to have Merkel’s personality and ability to lead and control both Germany and the EU.” says Papasavvas. “Germany will be weaker under Laschet, but also less likely to veer off course with a more nationalistic agenda; thus strengthening the EU”. In terms of the impact on stocks, yields and the currency, “Laschet is the most EU friendly candidate, supporting further the euro currency. German yields are expected to rise in line with other government bond yields as the unprecedented stimulus combines with the eventual recovery leading to higher prices. We see German equities continuing to strengthen as a stronger Europe and a stronger China continue to benefit German industry” says Papasavvas.

What of hospitality?

What can be expected in terms of Laschet’s potential influence on the hotel industry? “Laschet would mean no real change to Merkel’s policy” according to Andreas Löcher; “due to the importance of other industries such as automotive, engineering and pharmaceutical industry, the more fragmented hospitality industry traditionally has been less in focus for German policy”. 

Andreas Ewald, Managing Partner of the worldwide operating hotel consulting practice of Engel & Völkers adds: “Armin Laschet is considered a business-friendly politician [but] concrete effects of his chancellorship on the hotel industry cannot be foreseen. However, it is to be expected that, as a politician with close ties to the economy, he will also have an open ear for the prevailing problems of the hotel industry. Existing aid programmes could be extended or supplemented under his chancellorship”.

Laschet’s support of the hospitality industry may depend on the composition of the coalition in government after the election. According to Andreas Löcher, “The FDP is the only party which may have a stronger focus on hospitality, having pushed through a reduced VAT for hotel services in 2010. If the FDP were to be part of a governing coalition after the election, this might have a slightly positive effect on our industry". Andreas Ewald adds “A coalition with the Greens / Alliance 90 seems likely. But it could also amount to a three-party coalition with the Greens and the FDP. In this case, the hotel industry in Germany would have a direct stakeholder in the government. However, the FDP would only be a junior partner with limited influence".

Henri Wilmes however does not expect “any major impact on the hotel investment market coming from the political environment. Any recovery of the hotel investment market will be mainly driven by a recovery of the underlying trading fundamentals of the hotels. And ultimately, this means people being able to move freely and travel again (i.e. demand coming back) which will lead to operators, investors and lenders having again more certainty when it comes to forecasting the future.” From an investor’s perspective, “Germany is well positioned for such recovery given its strong reliance on internal demand when compared to other European countries. Hence a lot of investors will have Germany in the top of their lists when trying to deploy capital into the hospitality space".

As for the impact on other European countries, Wilmes does not expect “a major impact on the hotel investment market as a result of the next German elections. More important are when travel restrictions will be lifted and how Germany will regulate future travel given the importance of German outbound tourism on other European countries”.

The federal election for the Bundestag is expected to be held on 26 September 2021. The selection process for the candidate for the position of chancellor is still ongoing and a decision is not expected to be made before April.