BERLIN — The European hotel industry is back with a bang as 2,400 delegates converge on Berlin in glorious May sunshine for the 2022 edition of the International Hotel Investment Forum, which has the theme of, "People, Planet, Profit."

Speakers shared data and anecdotes around Europe's recovery from the pandemic, transactions and financing trends, and potential challenges stemming from the war in Ukraine, but environmental, social and governance topics were part of every discussion.

Sustainability in particular was front and forward. Optimism was palpable, but attendees added sustainability — demanded by both investors and guests — is what will drive the industry forward out of more than two years of pandemic-related challenges.

One major message was the customer journey needs to be measured in sustainability, but profits are increasingly the focus across the hotel industry.

"We're giving the GMs a slice of the deal. They’re the ones with the boots on the ground. It will be interesting to see if the industry adopts that idea more and what the effect will be on returns."
—Christopher Oka, managing director, Angelo Gordon, on the idea that property-level managers can be more invested in success when they are financial partners.

Earlier downturns were "like a little fight in the school yard. COVID was more like stepping in a ring with Mike Tyson, going 12 rounds, then getting your ear bit off."
—Norbert Speth, vice president of strategy and openings, Deutsche Hospitality

“The potential regional instability is a significant factor real estate investors are considering.”
—Coley Brenan, partner and head of Europe, KSL Capital Partners, on the impact the war in Ukraine is having on the hotel industry.

“Real ADRs are touching 2019 levels already when you look at some weeks. After most previous downturns, it took 5-7 years to recover real ADR," said Robin Rossmann, managing director, STR, in his presentation of global hotel industry performance data. STR is CoStar's hospitality analytics firm.

Leisure hotel demand continues to lead the recovery in Europe, as it has around the rest of the world, driven most recently by ski destinations, beach destinations and strong overall recovery in the UK. According to STR data, rates across Europe are just above 2019 levels, rates in the Middle East are about 30% above 2019 levels and China’s no-tolerance COVID-19 policy has resulted in rates about 30% down right now. And judging by the optimism here in Berlin at the International Hotel Investment Forum, Europeans are very happy with general performance and recovery across the region.

Of course, you can’t paint Europe with a broad brush. The UK may not be part of the European Union anymore, but everyone is happy with its rate and occupancy performance, particularly since the start of the year. Laggards — at least for now — include Austria and Germany, largely because they held on to COVID-19 restrictions later than other locations, but speakers said they expect a quick catch-up.

As confidence grows, so does investment. Institutional capital continues to make its way into the region and talk is expanding to increased interest in franchising. That added wave of institutional capital into Europe represents an opportunity, said Nabil Aquedim, managing director at Goldman Sachs.

“It’s good for sellers,” he said. “It means more capital, more liquidity, more opportunities for everyone – the owner, the brand, the manager.”

—Stephanie Ricca, editorial director
@HNN_Steph

It was most interesting to hear at IHIF what sustainability means in the industry beyond the accepted Environmental, Social and Governance format.

Camil Yazbeck, senior vice president of development, Northern Europe, Accor, spoke eloquently about how success cannot be measured in how rooms are sold and at what price. True success, he said, has to be redefined to equally focus on what little things each one of us decides to every day.

"That is what will truly drive sustainable profits," he added.

His colleague Brune Poirson, chief sustainability officer at Accor, told the conference that it needed to tackle carbon footprint but be aware that it was only a very small tip of the iceberg.

"Biodiversity is what we need to tackle," she said, referring to what must be a much larger cognizance of humans' effect on the planet. "There will be a massive amount of legislation around biodiversity that will come from governments and we will need to tackle."

Investors will increasingly demand such cognizance, and getting it right will be the difference between business survival and failure.

—Terence Baker, senior reporter, Europe
@terencebakerhnn

The hotel industry in Europe and beyond is in a historically odd spot. In many, many places, things are actually going fairly well. Sure we're still lagging behind in corporate demand compared to pre-pandemic, but booming leisure travel has more than made up for that in many markets. These are, by many measures, reasonably good times for the hotel industry.

But it's also a time that cries out for a desperate and pressing need for change. Accor's Poirson, mentioned above, noted companies will need to change to take sustainability very quickly or risk serious and far-reaching regulatory hurdles.

She said hotels could face the same fate as France's coal burning power plants, that lost all of their value virtually over night when that country passed regulation demanding they close withing three years. Hoteliers need to be doing everything they can to be sustainable, curb their carbon emissions and protect biodiversity.

"Real estate can lose all of its value overnight with a change of regulations, and that's exactly what's happening now at an EU level," she said. "It comes down to do you want to future proof your asset or not."

—Sean McCracken, news editor
@HNN_Sean

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