Luxury hotels hold their appeal for real estate investors

Luxury hotels have been hit by stringent global travel restrictions, but as wealthy guests return in ever greater numbers, so too are investors.

Ivestment in European luxury hotels, which accounts for 13 percent of the wider hotel investment market, is now close to pre-pandemic levels, according to JLL data.

Even during the pandemic, interest in luxury hotels was resilient – even if many investors remained cautious during the first wave. Since March 2020, 26 luxury hotel deals have been signed in Europe, worth a total of €2 billion (US$2.36 billion).

These include Austrian group SIGNA’s purchase of the Hotel Bauer Palazzo Venice and Spanish family Casacuberta’s acquisition of the Hôtel Beau-Rivage in Geneva. In Madrid, the Archer Hotel Capital investment vehicle, co-owned by Singapore’s GIC and Dutch pension fund APG, paid €205 million for The Madrid Edition last year.

“Investment in luxury hotels never completely went away,” says Gwenola Donet, head of EMEA Hotels & Hospitality Strategic Advisory at JLL. “Like all areas of the hospitality industry, the pandemic disrupted normal activity but an historic scarcity of opportunities to acquire luxury hotels - assets only trade perhaps once in a generation – has meant no shortage of bidders are at the ready when opportunities arise.”

Wealth preservation

In the coming months, luxury hotels could benefit as investors look for ways to hedge against rising inflation, JLL predicts.

Middle Eastern investment and hospitality firm Range Developments is offering investors the opportunity to put capital into its five-star luxury resorts in the Caribbean as an inflation hedge.

“Inflation, alongside geopolitics, remains a factor for investors seeking safe options for wealth preservation – and luxury hotels offer that,” Donet says.

She expects the type of luxury hotel investor to change in the coming years as a new generation of high-net worth individuals takes the helm.

“We’ve been used to a certain type of investor so far, often traditional family wealth or capital from oil-rich regions such as the Middle East,” Donet explains. “But that could change as individuals who have made significant wealth from the world of tech emerge.”

Regardless of wealth base, investors are more convinced than ever that “the higher the hotel star, the safer the asset”, Jahns concludes.

“The future of travel is all about providing guests with high-quality experiences and with more travellers willing to pay for premium for that, Europe’s historic luxury hotels will benefit.”