The European extended stay market saw its largest single deal in 2018 with Brookfield acquiring the SACO portfolio for a reported £430 million. What was interesting about the deal is that it also included the operational and development parts of the business. We’ve also seen other corporate deals in the space, including Hue Kee acquiring one-third of Cycas Hospitality in 2017, providing Cycas with capital for expansion while lining up Hue Kee as a potential co-investor on future property deals.

These types of corporate acquisitions are a relatively new trend in the sector and it’s the lack of purpose-built stock that is driving this activity.

The latest research from Savills shows that large operators across Europe have reported significant increases in extended stay unit numbers since 2015 with annual average growth of 6.1 per cent. Supply is forecast to increase a further 39 per cent by December 2022, equating to over 13,000 new units. Despite this expansion in supply, opportunities for investors to access the sector via real estate acquisitions have been relatively scarce, albeit the future pipeline will no doubt throw up further opportunities. 

The competition for extended stay assets is set to intensify as an increasing number of investors eye the sector attracted by its relatively low operational costs, ability to tap into the Airbnb market and its diversification potential against a backdrop of increased global travel. Indeed, Brookfield’s entrance into the sector has enhanced its legitimacy and attractiveness, particularly to institutional investors.

The growing appeal of the market to investors, combined with a lack of purpose-built stock, has meant corporate acquisitions are looking increasingly attractive as a way to gain significant exposure to the sector and at a much faster pace than could be achieved through single asset acquisitions or waiting for those rare portfolio deals.

Against this backdrop, we’re likely to see more corporate level deals across Europe but also operator mergers to drive portfolio expansion. With the operator landscape across Europe remaining fairly disparate, there is still everything to play for.

Further information

Read more: Spotlight: European Extended Stay Market