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Low interest rates prompts rise in financing on European hotels

24 February 2017 by
Low interest rates prompts rise in financing on European hotels

Europe has seen an upturn in the availability of hotel financing due to low interest rates and strong performance.

This is according to the annual European Hotel Lending Survey, published this week by brokerage and investment services specialist HVS Hodges Ward Elliott.

The survey of leading European banks found that although debt for hotels has become more widely available, there are regional differences in lending activity.

Debt funding was also found to be easier to obtain for existing property acquisitions, refinancing, renovations and expansions, than new hotel constructions, with only 50% of lenders willing to consider these projects.

Furthermore, lenders showed a clear preference for full-service properties at the upscale and mid-scale end of the market than economy hotels. The data also suggests Western European banks can issue the largest loans.

Southern European banks were the most positive about hotel lending over the next 24 months, while Western European banks varied in their outlook.
The same number of banks in Western Europe predicted an increase in hotel loans as those who predicted a decrease, while 60% agreed that lending from non-bank lenders was likely to increase.

London was replaced by Amsterdam as Europe's most attractive hotel investment destination, according to research by business advisory firm Deloitte last year, while UK hotel transactions during the first three quarters of the year reached £3.1b, 12% above the average over the past 10 years according to real estate company Savills.

Report author Peter Szabo, analyst with HVS Hodges Ward Elliott, said: "The widespread availability of bank financing for hotels is partly due to stronger hotel market fundamentals and a more resilient banking sector across Europe. Only half of Western European lenders in the survey were willing to consider new constructions, indicating their perception of the market being more mature with fears of possible oversupply.

"Bank lending has undoubtedly become more available over the past few years with more favourable hotel fundamentals across Europe, but most banks are cautious about increasing their lending."

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