What is happening in Germany and UK these days

GERMANY

As the IHIF is always held in Berlin and usually at the Intercontinental Hotel, it is appropriate to discuss how Germany is doing in the Development & Transaction market since June 2022 to June 2023.

Traditionally, Germany was a strong performer in terms of transaction volumes but last year found itself in fourth place in Europe, behind the UK, France and Spain. Of course, aside from the countries in and around the Med most places were down compared to the mod 2010s but the German market in particular looks sluggish.

Is the country facing the same problems as others, namely: a gap between buyers and sellers in pricing and tighter financing conditions due to rising interest rates, or is it something more specific? Could it be something to do with the favoured lease model?

“The combination of a weakening economy, rising interest rates, still too high price expectations on the vendors/sellers side, increasing geopoli6cal tensions and a recovery in tourism activities that has not yet been fully completed due to covid made the investment decisions of foreign hotel investors more difficult. The increasing regulation in Germany is also viewed with caution by many of them”-Ulrike Schüler, managing director and head of Germany at PKF hotel experts.

UK

Why Housing for Immigrants in the UK now is keeping the staff shortages under control.

What happen in the UK now: staff shortages are not as extreme yet as 400 UK hotels are now being used as Housing Asylum for immigrants.

UK is in a strange place at the moment. There have been relatively few deals with buyers and sellers far apart on pricing Consumer demand is still fuelling decent rates and there doesn’t seem to be any sign of distress. Add into the mix the 400 odd properties that are currently being used by the government under ‘exclusive use” contracts mostly to house asylum seekers.

These agreements were previously used for Covid- 19 related requirements such as isolation, and are having a par6cular impact on secondary towns and cities where they are distorting the local market.

The first big challenge is for the owner. Ok, so the contract might be lucrative now but what happens when it comes to an end. How are you going to pay for any necessary refurbishments? With a number of rooms has gone, you also have to start selling rooms without a DOSM as Business Model. Then where do you find staff as Brexit has reduced international recruitment. You’ve got a big chunk of rooms that are still to all intents and purposes off the market. But, it might displace business into hotels that are seeing a better performance as a result, but at some point, that asylum business may disappear.

What does that suddenly do to your bottom line.