Recovering occupancy rate attracts established and new (real estate) investors
The Dutch hotel market recovered significantly in the second half of 2021, according to analysis by real estate advisor Savills looking at the correlation between hotel occupancy and the number of passengers at Schiphol Airport. In the summer of 2021, both the average Dutch and Amsterdam occupancy rate increased to almost 60%, while the airport saw the highest number of passengers, at 10 million, since the start of the pandemic.
Schiphol's air traffic has increased considerably in the past three months (+250% compared to a year ago) and Savills expects this recovery to continue in the coming months. This will have a positive effect on hotel occupancy and thus the Dutch hotel market.
It is evident that the Dutch hotel market still faces a number of challenges in the near future, such as the recovery of occupancy rates and intercontinental flights, and availability of staff. Furthermore, macroeconomic conditions regarding inflation, rising interest rates and energy prices are all having an impact. The future supply of hotels in the Netherlands, especially in Amsterdam, is very limited. Due to lower occupancy rates and room rates, future hotel developments would be unfavourable for the hotel market. The ‘hotel moratorium’ regulations of the Amsterdam Municipality restrict future growth of Amsterdam’s hotel supply. However, this has a positive impact on the balance in the Amsterdam hotel market, as occupancy is not yet at pre-pandemic levels.
Although demand-supply ratios have deteriorated during the pandemic, investors are nevertheless still interested in hotels.
Ruben Schuuring, Associate Director Hotel Investment at Savills in the Netherlands, explains: “Investors who want to buy hotels are currently demanding lower prices compared to before the pandemic, due to the much lower occupancy rates. However, sellers are not (yet) willing to sell at lower prices. The key driver to increase transaction dynamics lies in the recovery of the user market. That remains a fragile balance with the current uncertainties regarding energy prices, inflation and the situation in Ukraine. Despite these uncertainties, we see clear signs of confidence in the hotel market."
Capital injections from private equity and private wealth have already entered the Dutch hotel market, with stakes being taken in hotel companies and operator platforms. The interest from this type of investor is expected to remain high and will see investment in both property and operation. The uncertainties that continue to exist still present risks, but they are also offset by higher returns. These returns are higher compared to other asset classes, and higher yields are currently scarce in the Dutch real estate market. Therefore, hotels offer a good strategy for diversifying a real estate portfolio.
Bas Wilberts, Head of Residential & Hotel Investment at Savills in the Netherlands, says: “Given recent transactions such as The Albus, Mercure and QO in Amsterdam, and HIEX in The Hague, we believe that the investment market has woken up and market dynamics continue to evolve in a positive direction. This is especially true for established hotels and private equity-backed investors looking for major renovations and change of operating opportunities.”