European Hotel Industry Update : Spotlight on Ireland

These are the key findings from the 2020 Deloitte European Hotel Industry survey, conducted as part of the annual European Hotel Industry Conference. The survey was closed on Thursday 1st October. The survey represents the views of a sample of senior hospitality figures, including owners, operators, lenders, developers and investors.

Top Priorities

Stakeholder relationships and workforce health and safety have seen a drop since the last survey in July 2020 as businesses are now better prepared. The significance of remote working capabilities and transaction or expansions have also increased since the last survey in light of the second wave of the virus.

Investment Opportunities

Assets with a focus on sharing experiences such as co-working, co-living, student housing and hostels have seen a decline in investment appeal, a total decline of 25 percentage points from the previous year. Hostels for instance plunged from 17% to just 1% as an attractive asset from the previous year. Holiday parks on the other hand climbed from 1% to 8%, possibly driven by the growth in domestic travel.


Protectionism, otherwise known as closed borders, as a risk for the hotel industry has seen a significant jump of 9 percentage points in Europe compared to the previous year. While being positioned in the middle of the list, climate change risks has seen a 3 percentage point growth compared to the previous year for the European hotel industry. Political tension as a risk saw a decline of 15 percentage points in Europe. 7% of European respondents considered the weakening of the currency a risk.

Focus on Europe

Top 10 European Cities for Investment

Amsterdam remains on top for the fifth year in a row as the most attractive European city for hotel investment in 2021, London reclaims its position pushing Paris into 3rd place. Berlin leaps ahead to 4th place from 16th in the previous year, pushing Lisbon down by one spot to 5th place. Barcelona holds on to 6th position, while Madrid slips down five spots to 10th place. Dublin falls to 15th place, having been placed in the Top 10 for the last number of years, perhaps due to amount of supply that has come into the market in recent years and that which is still expected to come on stream over the next few years.

Financing the European hotel market

Private Equity investment remains the preferred source of equity capital for hotel acquisitions in Europe, with respondent sentiment almost doubling, an increase of 22 percentage points versus the previous year. Demand from Institutional investors and REITs is predicted to soften in 2021, down by 9 percentage points and 10 percentage points respectively from the previous year. Senior bank lending is expected to remain the most common source of debt financing, followed by REIT and distressed debt funds.

  • Almost two-thirds of the respondents (59%) expect hotel investment to come from domestic sources within the EU. Increased activity is expected from the UK (30% up from 17%) and North America (50% up from 38%). Less than a quarter expect hotel investment to be sourced from the APAC and MENA regions.
  • Two-thirds of the respondents view senior bank loans as the most common source of debt financing (dropping to 66% from 90% in the previous year) in the European hotel market; Irish respondents also viewed direct lenders and sovereign wealth funds as avenues of debt financing (as opposed to REIT and distressed funds across all European respondents).

Respondents predict all European markets to be in a downturn in 2021. A proportion of respondents however believe that some markets will level out in 2021 (29% for Greece and 25% for The Netherlands).

Spotlight on Ireland

Performance Statistics

  • The impact of covid has been demonstrated by various performance measures including recent STR data, which showed that occupancy in Irish hotels year to date October was approximately 56% lower than in the same period last year with RevPar down c.65% year-on-year. 
  • City centre hotels in Dublin were particularly negatively impacted by the lack of international tourists and business travellers with year to date October occupancy c.62% lower than prior year and RevPar down 72%. In contrast, some hotels in regional locations (particularly those in coastal locations) were insulated to some degree, having benefited from an increase in domestic tourism this year.

Phase of the Irish hotel investment cycle

Half of respondents believe Ireland’s hotel investment cycle is in a downturn in 2020, an increase of 44 percentage points from 2019. Just 9% of respondents think the Irish hotel investment cycle is currently in a peak, with even fewer (6%) believing the cycle is experiencing an upturn.

Bank and direct lender response to COVID-19

To date debt providers (both banks and direct lenders) have been largely supportive, introducing a number of measures to attempt to ease liquidity pressures.

While not closed to new business, banks’ risk appetites have unsurprisingly scaled back somewhat while they focus on their existing hospitality exposures. Due to their own regulations there will be no more blanket forbearance measures offered with forbearance into 2021 and beyond assessed on a case-by-case basis.

Alternative lenders in the market remain selectively open to new business, however they are likely to focus on city centre located hotels which are an easier underwrite.

For those hospitality assets with over-leveraged balance sheets restructuring of the debt is inevitable. Whilst sticky tape has been applied to help a number of businesses muddle through via government supports, as well as temporary covenant waivers from their lenders, this will ultimately come to a head for a large number of borrowers looking for structural solutions to over indebtedness, including forced sales by creditors, debt for equity swaps, or in extreme cases where there is no residual value, a liquidation. We would expect distressed M&A and restructuring activity to increase over the next 24 months, as borrowers seek long-term solutions to their capital structure.

Alternatives to banks and direct lenders include the ISIF Pandemic Stabilisation and Recovery Fund, which can provide a range of structures such as long term debt, subordinated debt, convertible loan notes and equity to those larger scale operators and also private equity houses / investment banks who will look to equity and hybrids of equity to invest.

The Deloitte Debt & Capital advisory team can help borrowers navigate through these unprecedented times and are available to provide advice and guidance on the most appropriate approach to adopt going forward.

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