As investor interest in Italy grows for value-added hotel operations, the world of institutional investors has good news for the future of the Italian hotel industry.
Investors are attracted by Italy’s hotels
With the asset class of hotels receiving a lot of attention, it is attracting a lot of capital according to Cbre Italy's Francesco Calia, who says just over €1 billion were invested in hotels in the first three quarters of the year (roughly last year's levels), for a total of 8.8 billion in the last five years (including the annus horribilis of 2020).
Strong focus on the four primary markets
Italy ranked fifth in Europe for hotel investments in the first nine months of 2022 (as it did in the same period in 2021), despite being the seventh market in Europe for commercial real estate. An examination of the last five years' historical trend reveals a growing emphasis on value-added hotel operations (mainly for conversions from other uses, such as offices, or the major repositioning of existing hotels). These account for 70% of transactions in the first nine months of 2022, with a strong focus on the four primary markets (Rome, Milan, Venice, and Florence), which now account for around 60% of transactions. Investment in resorts is also growing and will account for some 35-40% of the volume invested in hotels in 2020.
Luxury conversions in sea, lake, mountain, and rural areas
The excellent recovery recorded during the summer season and subsequent months, particularly for the luxury leisure segment (in Rome, for example) and in resorts, has fueled investor interest in sea, lake, mountain, and rural properties. The most significant transactions this year have been in luxury conversions in Rome and resort destinations, including the future Four Seasons Rome in Piazza San Silvestro, the repositioning of the Majestic in Via Veneto in Rome, and the rebranding of the Savoy in Cortina d'Ampezzo.
“Cbre is focusing on three luxury-lifestyle developments in the centre of Rome”
The ongoing development in the luxury and extra-luxury sectors, as well as the openings of international hotel chains in this range, suggest an ambitious investment pipeline for the next 18/24 months, despite rising raw material and construction costs. “At Cbre we are focusing on three luxury-lifestyle developments in the centre of Rome that are expected to close in the first half of 2023, for a total value of over €500 million euros. International capital will continue to dominate the Italian hotel investment market” adds Calia.
Further REVPAR growth and interest in secondary urban destinations
In terms of management performance urban hotels are expected to achieve further REVPAR growth although operators do not anticipate further increases in average rates this year. The expected recession may have a greater impact on corporate demand (restrictions on business travel are already in place), with ramifications for secondary urban destinations with a strong business vocation and for midscale/upscale properties. Leisure demand in Italy, on the other hand, is expected to go on growing thanks to international markets and the great Italian art cities of Rome, Venice, Florence with upper-upscale and luxury properties benefitting most.
