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Cbre: Rome and Milan drive the performances of Italian hotel real estate

By Friday, 11 November 2022 09:47

Investors are interested in Italian hotel real estate thanks in part to the gradual recovery of performance compared to pre-pandemic levels. The investment volumes in the Italian hospitality sector amounted to €730 million in the first half of this year, exceeding the levels of the same period in 2021, a year that ended with total transactions of €2.1 billion, the best result ever after the record of 2019, when the €3 billion threshold was crossed. In the last 12 months the incidence of investments in the hotel sector on total investment volumes in Italian commercial real estate (income properties excluding residential, Ed.) was 16%, compared to 5% in Europe. And Rome and Milan continue to dominate the scene.

Luxury and extra-luxury for Rome, and upper upscale for Milan 

At the Wanderlust 2022-The Cbre Hotels Event investors were showing particular interest in the Roman market, aiming to reposition existing properties and convert office properties in the city's historic centre, particularly in the luxury and extra-luxury segment. In Milan the upper upscale segment saw core investors purchasing income hotels or rebranding existing properties. From 2019 to the end of the first half of 2022, the incidence value-added operations in Rome hit 62%, while in Milan it stood at 47%.

Average rates up by double-digits

In terms of performance the average daily rate in Rome and Milan increased by 21% and 14%, respectively, and were the best results among European capitals, with Rome’s second only to Paris in terms of the rate of growth. However hotel occupancy rates are still lower than in 2019, at -14% in Rome and dek -22% in Milan, but in line with the European market. As a result, the average revenue per available room in Rome has already surpassed the levels reached in 2019 (+ 4%) while it remains slightly negative in Milan (-11%).

In addition to the big cities, the resort segment is also doing well

“Since the Covid recovery and for the foreseeable future the resort segment and the cities of Rome and Milan have driven, and will continue to drive, the Italian hotel investment market, absorbing approximately 70% of the invested capital to date,” said Francesco Calia, Cbre's head of hotels. 

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