Italian Hotel Market:
Italy has the highest number of hotels in Europe and is ranked fourth in the world behind the US, China, and Japan. The number of hotels amounts to 33 thousand and the number of beds amounts to 2,248 million.
The average hotel in Italy is rated between 3-4 stars and the number of 5-star hotels is steadily increasing, while the number of 1–2-star hotels is decreasing.
Hotel Investments in Italy:
The tourism industry was one of the main sectors that was most affected by the Covid-19 Pandemic, as there was a massive decline in international demand due to strict travel restrictions. Many borders were closed in attempt to contain and slow the spread of the virus. The number of tourists is still not at the pre-covid level; however, many hotel operators and real estate investors are confident that the market will bounce back sooner than expected. The tourism industry is steadily rising due the rollout of vaccinations and the implementation of the green pass and sequentially, interest in the Italian hotel sector has spiked.
Looking at the graph below, the hotel asset class represents the 15% of the investments recorded in Italy and the volume is close to €800 million. The share of hotels is steadily increasing since the record year of 2019, which was the last year before the pandemic struck.
An International Market:
This year, strong market activity was observed in Venice, confirming the trend that started back in 2019. Conversely, the city of Rome, which is usually the number one destination spot, has recently recorded lower activity as investors are unable to find the right product. The low number of closed deals have brought great concern to reconversion and refurbishment projects. However, there is an important deal underway which is the sale and leaseback of a new brand five-star family hotel.
Like Rome, low activity was recorded in Florence and Milan. However, there is hope that the 2026 Winter Olympic Games, hosted in Milan, will boost investments due to the creation of new hotels and through the refurbishment of existing ones.
72% of investors in Italy are foreigners mainly coming from the Eurozone. Looking at the percentages, Rome has the most native investors while Venice has the most international investors. Each city is dominated by a certain nationality – the British are most active in Venice, Asians (including the Middle East) are most active in Florence, and Milan is attracting investors from the Eurozone, specifically Germany and France.
Repositioning is the Key Strategy:
The most common sale price for hotel deals in Italy is around €20-40 million. In 2021, the number of properties deals with a high sale price (€40-100 million) increased, as it represented 42% of the market. Deals above €40 million are mostly concentrated within the big four markets and 86% of those deals are closed in Rome, Venice, Florence, and Milan. The repositioning of pre-exiting hotels is becoming more common which will allow the market to renovate its existing stock, however, building permits and license grants are imperative for the conversion and must be assessed carefully.
Outlook for 2021 (According to a report from Colliers):
- The market should arrive above 1 billion at the end of the year which is a very good outlook for the hotel investment market in Italy.
- While no significant price reduction has been observed over the last two years, investors motivation remains high.
- The Grand Tour – Rome, Venice, and Florence – will continue to be main destination spots in Italy. Milan is on investors radar, especially as it is the host country for the 2026 Olympic Games.
- The focus on leisure hotels is increasing steadily as people will continue go on vacation.
- Luxury hotels will remain of interest for investors and new models will continue to the enter the market, such as serviced apartments, mixed-use, and hybrid hotels.