BERLIN — Germany-based Union Investment continues to look for ways to diversify its hotel portfolio in segment and geography, but the company's head of hospitality said the deals environment continues to be difficult.
Andreas Löcher, head of investment management for hospitality at the Frankfurt-based investment firm, said Union Investment has recently been looking "closer to home" but there is the possibility of moving into more investments in southern Europe with "big open-ended funds."
"We've have been successfully investing in Barcelona and the Radisson hotel, which is performing tremendously well," he said at the 2024 International Hospitality Investment Forum. Union Investment bought the hotel in 2022 and rebranded it to the Radisson Blu 1882 Hotel, Barcelona Sagrada Familia.
Löcher said he doesn't expect the transactions pace to pick up until interest rates begin to fall.
"That's actually the starting point of everything, when interest rates will go down," he said. "I suppose then finding [transactions] will be easier. There will be an invigoration in the market, and more transactions and activity will come back."
But for the time being, hotel deals continue to be stymied by a persistent bid-ask gap between potential buyers and sellers.
"Potential buyers have to cope with relatively high financing costs, and potential sellers may not be distressed and are just saying 'I can keep it and wait until markets improve again,'" he said.
Löcher said one positive trend his company has observed across its portfolio is a noticeable uptick in business travel. He said even in Germany, which has had some economic headwinds, there has been a rebound for hotels and cities that have "the right mix of business and leisure travelers."
For more from HNN's interview with Union Investment's Andreas Löcher, watch the video above.