Middle East investors splashed $5.2bn on iconic European hotels in last two years

Middle Eastern buyers invested €4.79bn ($5.22bn) in iconic hotels across Europe in the last 24 months, according to a new report by property consultancy CBRE.

The United Kingdom was the key target market for regional investment, receiving £2.72bn ($3.87bn) of the total amount. It was followed by Italy ($617m) and France ($613m).

Recent assets acquired by Middle Eastern investors include Claridge’s, The Connaught and the Berkeley in London’s Knightsbridge, as well as the Intercontinental Paris Le Grand.

The report revealed that total European hotel investment volumes in 2015 were triple 
that of the same period in 2007.

“While many predicted that the fall in global oil prices would dampen the heady tempo of investment flow from net exporting regions, Middle Eastern interest to acquire hotel assets has not abated,” the report said.

This is partly because the region’s substantial oil reserves have allowed the respective nations to continue with their allocations into overseas real estate – at least for the short term, it added.

Managing director of CBRE Middle East Nick Maclean said: “While the fall in oil revenues for many of the sovereign wealth funds will have an impact on spending ahead, trophy and strategically important assets will continue to attract strong interest, particularly in the gateway cities of United States and Europe.

“Investment in the highest quality hotels in the most international cities is seen as a secure component of the real estate markets.”

He added: “Medium to long-term investment into these top-tier hotel assets generally reward owners with a high level of stability in an increasingly volatile world of commodities and equities.”

The report said Middle Eastern investors continue to seek new hotel markets with Central Europe now increasing in appeal. However traditional markets such as Paris still retain their charm.

Head of Hotels France, Belgium, Luxembourg, Switzerland at CBRE Catherine Rawanduz said: “The Parisian market is experiencing an influx of international capital. As part of the Eurozone, Paris is seen as a secure place for investment and is the second priority, behind London, for international capital.

“We’re seeing a steady increase in interest from Middle Eastern investors in upscale and trophy assets, with a number of transactions taking place over the last 18 months. High net worth families and sovereign funds from Qatar are leading the pack.”

However, the report also found that Middle Eastern investors are now looking beyond just the trophy assets.

In March 2015, Qatar Airways completed the purchase of the four-star Sheraton Skyline at London’s Heathrow Airport. This was followed by the subsequent purchase of the Novotel Edinburgh Park – a mid-market operation located in close proximity from Scotland’s busiest gateway.

“This widens the spectrum of targets for capital from the Gulf entering the European hotel space, and a likely continuation of this trend will add to the ever-increasing liquidity that is seen in the sector,” the report added.