Euro debt crisis lures Middle East hotel investors

Opportunities for Middle East investors in core Western European markets is coming into focus at the annual Arabian Hotel Investment Conference 2012 (AHIC) in Dubai. “Europe’s worsening debt crisis will tempt investors from oil-exporting Gulf states, flush with petrodollars, to broaden their search for potential bargains, as Europe’s capital markets dry up. Credit conditions are extremely tight, banks are struggling to raise enough cash to cover their own liabilities let alone lending to others,” commented Richard Thompson, Editor, MEED “This is naturally leading to an increase of distressed real estate assets in Europe and in the case of hotels, many offer yields that outperform other property investments and are coming to market well below their peak market values, as prices remain subdued,” added Thompson. A good example of that was the recent purchase of the prestigious Carlton Hotel in Cannes on the French Riviera, which was sold for EUR 450 million to Qatar-based investor Ghanim Bin Saad Al Saad. That figure was significantly lower than the EUR 634 million that Morgan Stanley paid for the Carlton in 2006. The Qatar investor is also interested in other properties of the InterContinental chain including those in Vienna, Frankfurt, Budapest, Rome, Amsterdam and Madrid. Speakers at this year’s AHIC event discussing investment opportunities outside the Middle East include H.E. Enrique Meyer, Minister of Tourism, Argentina; Tarik Senhaji, Chief Executive Officer, Moroccan Fund for Tourism Development and Kevin Wallace, General Manager, Hospitality Investment and Development Dutco Group and President and CEO, Jebel Ali International Hotels. Other Middle Eastern investors have also made the headlines recently with a raft of high profile hotel acquisitions in London and Paris. In the last two months alone, Qatar National Hotels Company (QNH) snapped up Le Royal Monceau – Raffles Paris, while late last year Middle East investors spent some $500 million buying luxury hotels The Sanderson, St Martins Lane and the W Hotel, in London. Global hotel transaction volumes will hold steady in 2012 to reach upwards of US $30 billion in deals according to recent figures released by Jones Lang LaSalle, in line with 2011 figures, which were up 13% from 2010. Hotel investment activity is expected to remain stable across EMEA this year with $11 billion worth of deals expected, similar to 2011 levels, the real estate and investment consultancy said. London and Paris will remain the primary drivers for investment activity, it added. “The increasing focus on hotel acquisitions is the latest in a series of Gulf-wide investments in European assets,” commented Kevin Wallace. Outside the hospitality sector, Qatar’s investment portfolio includes luxury department store Harrods, and stakes in Barclays and the London Stock Exchange. Elsewhere in the Gulf, Abu Dhabi’s flagship carrier Etihad Airways recently raised its stake in Air Berlin to nearly 30% as it continues its aggressive expansion plan. One of Abu Dhabi’s most high profile European acquisitions remains Manchester City Football Club. Held under the patronage of HH Sheikh Ahmed Bin Saeed Al Maktoum, President Dubai Civil Aviation Authority, Chairman Dubai Airports and Chairman and Chief Executive, Emirates Airline & Group, organiser MEED Events in partnership with Bench Events has put together a three-day programme designed to explore the outlook for hotel investment in the Middle East’s changing landscape. The Middle East reported positive results in the three key occupancy performance measurements in 2011 despite the Arab Spring, according to industry consultants STR Global, although performances in individual countries differed greatly. Occupancy rose by 3% to 62.3%, revenue per available room (RevPar) increased by 4.1% to US$125.66 while average daily rates increased 1.1% to US$201.66. Staying with the Arab Spring theme, AHIC will also hold sessions focusing on individual case studies. Samih Sawiris Chairman, Orascom Development Holding, will examine the issues facing Egypt, while other key industry figures will address the challenges of developing and operating in the holy cities of Mecca and Medina in Saudi Arabia.