The largest amount of capital was poured into the UK with some EUR5.3 billion (GBP4.4 billion) – 23% of total volumes, a 15% decrease on the previous year. German destinations booked the second most investment volumes at just over €4 billion (18% of total volumes), up 6% on 2018 levels.

In terms of room count, however, Germany transacted 21% of all hotel rooms and 18% of all hotels while the UK came second with 20% of all hotel rooms and 22% of the total number of hotels.

Co-author Shaffer Patrick, an analyst for HVS’s brokerage and investments division, HV Hodges Ward Elliott, said: “Record low interest rates amongst various European countries and continuing yield compression in key markets have helped to drive large investment volumes compared to previous years. Asian investors have deployed 84% more capital in 2019 than in 2018, with a dominating presence from Chinese, Singaporean and South Korean investment firms and sovereign wealth funds. These factors, combined with the comparative affordability due to a weakening of the euro and sterling on account of Brexit have made Europe an even more sought-after hotel investment market.”

London remained the leading European hotel transaction market with a total volume of around €2.2 billion (£1.8 billion) in 2019, ahead of Amsterdam at €1.1 billion. Vienna saw a substantial investment increase of 641% to €709 million on the previous year, following relatively little activity in 2018. While Germany’s five largest cities – Berlin, Munich, Hamburg, Cologne and Frankfurt – jointly reached a transaction volume of €1.5 billion, a 25.5% fall on levels in 2018.

In most cases, investment demand was supported by the on-going strengthening of industry fundamentals as year-on-year value per room growth in 27 of 33 major European markets continued its upward trend.

The rise in popularity for operating leases in Europe has also led to strong buyer interest from institutional investors, which typically look for low-risk, stable returns over the long term. This is in contrast to last year’s buyer market, which saw heavy investment from private equity firms seeking higher rates of return.

However, the report expresses doubt that this level of transactions will be achieved in 2020. “New supply and the UK’s divorce from the European Union will influence transaction volume this year,” commented report co-author Nicolas Auer, associate, HVS Hodges Ward Elliott. “Other factors such as staffing pressures, inflation risks, trade wars, coronavirus-related travel bans or cancellations and concerns that a global economic slowdown might also trigger hesitation in some investors’ minds.”