Investors are more and more often looking at hotels when looking for alternative property investments.
The number of hotel accommodation in Denmark has been steadily rising since the financial crisis, and although capacity has increased over the same period, the occupancy is also positive. The market offers many possibilities but investments in hotels are anything but a passive money placement.
Several big institutional investors have, in a short period of time, bought a number of hotel properties. Many Danish hotels are reporting of record returns these days, and there are expectations of rising tourism and more air routes that can secure a lot of guests to the hotels in the coming years.
The pension companies invest billions in Danish hotels in pursuit of stable returns on the pensions the Danes have paid to sweeten old age. It is a new area for pension funds that have an appetite for much more acquisitions in Denmark.
The pension fund invests in the property where the hotel is located and is thus not involved in the actual operation of the hotel. According to the Danish Industry Analysis, the hotel industry has book values in properties totaling DKK 31.5 billion.
And the industry has also proved its best, for the third consecutive year, the hotel industry can celebrate that it has earned over one billion DKK a year.
The current focus on hotel properties is due to the fact that many pension companies hold large liquid funds. The return on bonds is at the bottom, and investors are therefore looking at other activities with stable returns. Here hotel buildings are a good alternative to office buildings and other commercial premises.
“Abroad, many large institutional investors have long placed funds in the hotel market, while this is still relatively new in Denmark. I expect more investments in the area in the coming years,” says Peter Winther in an article for finans.dk. He is a partner and Managing Director of Sadolin & Albæk, which provides real estate and business leases.