Values down 10% to 20%

Ritz London

Hotel values have gone down from pre-Covid levels by around 10% to 20% depending on their operating structure and location, according to Charles Human, president of HVS Europe.

Human said that most investors believed that the sector will recover relatively fast once the corner was turned.

He added: “Over the longer term values will recover as cash flows improve and capital markets return to more traditional parameters. Overall we think there is a continuing opportunity for high returns, with well capitalised buyers acquiring hotels at prices well below replacement cost and below recent norms. Hoteliers are creative and where there is a hole left by certain types of demand they will fill it with others. London and Paris will shift more to leisure markets, for example.”

Commenting on “intense” activity, Human said: “We’re valuing for two purposes at the moment - reports for banks and owners who want to get a grasp of current value and also values for owners that may want to consider a sale. There is a wall of money from buyers that know there will be a recovery and are looking through to market stabilisation – we are getting a lot of traction, to the point of competitive tension, on the sales we are handling.”

Speaking at a webinar hosted by HVS, AlixPartners, Bird & Bird and EP Magazine, HVS London chairman Russell Kett said: “There are obviously downward pressures on current values, caused largely by revenue and Ebitda declines as well as the wider economic recession. But there are also factors holding prices up including that supply growth is likely to slow as well as the fact investors haven’t changed their strategies and the on-going opportunity for high returns post-recovery.

“Hotel values are lower at the moment, but we think these will get back to pre-Covid levels over the course of the next four years.”