October: Holiday Hotel Industry Gains Attention

October: Holiday Hotel Industry Gains Attention

Chart of the Month
02.10.2020 Author/s: Dierk Freitag

The lockdown brought tourism in Germany, as everywhere else in the world, almost to a complete standstill. Since then, the number of overnight stays has collapsed, in some cases by more than 90 percent in major German cities. The fact that the figures are not even worse overall is due to the vacation hotel industry. Developers and investors have long been thinking about new projects.

All forms of accommodation in Germany were equally affected by the slump in the number of overnight stays, with slight advantages for the economy hotel sector and for vacation homes and rental apartments. With the gradual lifting of travel restrictions, tourism demand rose again in June 2020. Nevertheless, June closed with a year-on-year decline in overnight stays of -41.7 %. 

The fact that the downturn was not even higher is due in particular to the leisure hotel sector, which achieved high booking volumes in many places during the summer months. In the Chiemsee-Chiemgau tourism region, the year-on-year decline in June 2020 was only -15.5%. And on the Baltic and North Seas, strong domestic demand also ensured relatively high guest numbers, primarily in vacation centers, houses and apartments, as the distance rules were better observed there than in hotels. In addition, many hotels had to significantly reduce their range of services due to hygiene regulations. Wellness areas were only allowed to be used to a limited extent, gastronomy only with restrictions. Nevertheless, the vacation hotel industry has gained attention through Corona. Developers previously specialized in retail projects now want to develop e.g. vacation projects on the North and Baltic Seas, and some investors, who previously only invested in city hotels, are now considering a mix.

However, some banks have already announced that they do not intend to finance hotels for the time being. And there is hardly any activity in the transaction area at present. In the second quarter of 2020 only eight hotels changed hands. And by mid-August only four sales have been added. The investors' view will change. Hotels with large event capacities or airport hotels could be the ones to suffer. In the future, investors will deal with the concept and operator more intensively than before, and will also take greater account of third-party use options in their purchases, as is now common practice for retail properties. On the investment side, hotels are currently a bet on the future. 

Even if a return to normality is achieved sooner, tourism in Germany is not expected to reach the 2019 level until 2022 at the earliest. A recovery is more likely in 2023/2024, as many source markets for tourism are much more affected by Corona than Germany. 

What the hotel industry urgently needs now are private and political players who have the will and the strength to balance each other out, on the private side both with tenants and with landlords. Such help is not a one-way street, but an investment in the future - because after Corona, all those involved will remember how they dealt with each other during the crisis. 


Note: The text is an excerpt from the chapter in ZIA's autumn report (in German language) by bulwiengesa on office, logistics, hotel and care properties.

Contact person: Dierk Freitag, Division Manager Hotel and Leisure Real Estate, freitag [at] bulwiengesa.de