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spotlight Spotlight | HotelsThe Netherlands

Savills World Researchsavills.nl/research

Q1 2018

Dutch hotels attract more than just tourists

This also can be seen in the hotel market which, in 2017, benefi tted from 28.5 million hotel guests - a new record and up 10% compared to 2016. The overnight stays increased by almost 9%, a hotel guest stays for on average 1.7 nights in Dutch hotels. Nearly half of the guests came from abroad, with the largest volume of guests

coming from other European countries, especially Germany, the UK and Belgium.These numbers are forecasted to grow even more due to the economic upswing, but also due to the fast expanding middle class in countries such as China, India and Brazil. For this group, travelling becomes more and more within reach.

Amsterdam is by far the most popular destination in the Netherlands, accounting for almost half of the foreign visitors. This is partly due to the cultural amenities the city has to off er, such as the world-famous canals and museums, and the appeal to business travellers thanks to large companies who

have their headquarters in Amsterdam such as Philips, Heineken and AkzoNobel and tech giants Uber and Amazon. Furthermore, the European Medicine Agency (EMA) recently announced they will relocate from London to Amsterdam in 2019. This institute attracts approximately 30,000 visitors a year and will therefore have a positive impact on the hotel market in Amsterdam.

Rotterdam is the second most popular destination within the Netherlands, while smaller cities such as Utrecht and Maastricht saw the highest proportional increase in hotel guests last year with +36% and +26% year-on-year growth respectively.

1

Spotlight | Hotels | The Netherlands

Economy and Tourism

introductionSupply, Room Rates, Occupancy and RevPARs

2

Savills World Research | Q1 2018

At the start of 2017 there were about 3,625 hotels (+1.1% compared to 2016), with a total of approximately 123,500 bedrooms (+2.1%) providing 269,000 beds (+3.0%).

These numbers also indicate that new developments are becoming larger on the whole. This growth of facilities is lower than the growth of tourists and overnight stays which resulted in higher room rates and occupancy, as shown in the graph below.

In Amsterdam, room rates and the revenue per available room (RevPAR) are the highest and are forecasted to increase further to €139 and €110 this year respectively. This keeps Amsterdam in the top 10 of cities in Europe with the highest average room rates.

Not only is the number of hotel guests increasing, the number of hotels in the Netherlands is increasing as well.

Tourism in the Netherlands is at an all-time high.

1 Source: CBS 2 Source: PWC, Standing out from the crowd - European cities hotel forecast for 2017 and 2018

The Netherlands ranks as the fi fth largest Eurozone economy with one of the lowest unemployment rates and a GDP capita of above € 41,000.

With its highly stable economy, the Netherlands is one of Europe’s most sought-after investment markets.

GRAPH: OVERNIGHT STAYS (SOURCE: CBS; SAVILLS FORECAST)

The number of hotel visitors and overnight stays in the Netherlands is increasing to new records

Room Rates

increasing

InvestmentVolume

record

Occupancy

higher

Yields

compressing

Supply

new developments

OvernightStays

contracting

60.000.000

50.000.000

40.000.000

30.000.000

20.000.000

10.000.000

02012 2013 2014 2015 2016 2017 2018

DOMESTIC OVERNIGHT STAYS

AVERAGE ROOM RATE

NUMBER OF ROOMS

INTERNATIONAL OVERNIGHT STAYS

RevPAR

NUMBER OF BEDS

HOTEL GUESTS

ROOM OCCUPANCY

NUMBER OF ACCOMMODATIONS

GRAPH: HOTEL SUPPLY KEEPS INCREASING(SOURCE: CBS, FORECAST BY SAVILLS BASED ON DEVELOPMENTS)

GRAPH: LARGE DEMAND CAUSES RISING ROOM RATES (SOURCE: HOSTA 2017)

€120

300.000

350.000

€100

250.000

€80

200.000

€60

150.000

€40

100.000

€20

50.000

0

0

56%

3.400

62%

3.550

68%

3.700

58%

3.450

64%

3.600

70%

3.750

74%

60%

3.500

66%

3.650

72%

76%

2012

2015

2013

2016

2014

2017

2015

2018

2016

2019 2020 2021

2009

2012

2011

2014

2010

2013

AVERAGE ROOM RATEAVERAGE ROOM RATE

NUMBER OF ROOMSNUMBER OF ROOMS

RevPARRevPAR

NUMBER OF BEDSNUMBER OF BEDS

ROOM OCCUPANCYROOM OCCUPANCY

NUMBER OF ACCOMMODATIONSNUMBER OF ACCOMMODATIONS

GRAPH: HOTEL SUPPLY KEEPS INCREASING GRAPH: HOTEL SUPPLY KEEPS INCREASING(SOURCE: CBS, FORECAST BY SAVILLS BASED ON DEVELOPMENTS)(SOURCE: CBS, FORECAST BY SAVILLS BASED ON DEVELOPMENTS)

GRAPH: LARGE DEMAND CAUSES RISING ROOM RATES (SOURCE: HOSTA 2017) GRAPH: LARGE DEMAND CAUSES RISING ROOM RATES (SOURCE: HOSTA 2017)

€120€120

300.000300.000

350.000350.000

€100€100

250.000250.000

€80€80

200.000200.000

€60€60

150.000150.000

€40€40

100.000100.000

€20€20

50.00050.000

00

00

56%56%

3.4003.400

62%62%

3.5503.550

68%68%

3.7003.700

58%58%

3.4503.450

64%64%

3.6003.600

70%70%

3.7503.750

74%74%

60%60%

3.5003.500

66%66%

3.6503.650

72%72%

76%76%

20122012

20152015

20132013

20162016

20142014

20172017

20152015

20182018

20162016

20192019 20202020 20212021

20092009

20122012

20112011

20142014

20102010

20132013

Most developments are taking place in the Amsterdam area, where approximately 4,000 rooms will enter the market in 2018, representing an increase of 13% of total supply.

In the period 2019-2020 another 3,000 rooms are expected to be added, which will bring the total supply of hotel rooms in Amsterdam to almost 40,000. The number of new hotel developments thereafter

will be less substantial, since the municipality introduced a ‘hotel stop’ in January 2017.

This means that as of that date, no new permits for hotel developments will be issued in certain areas, including the largest part of the city centre. In other areas such as the South Axis, the West Axis and parts of East and Southeast, developments are allowed if they meet certain criteria and add something “special” to the area, like an innovative concept.

In addition to the developments in Amsterdam, Savills has identifi ed more than 1,400 hotel rooms across the country which will be entering the market by 2020. In the tables above the largest hotel developments in Amsterdam and the rest of the country are listed. Quite noticeable is that almost all developments are for upscale, 4-stars hotels.

3


Developments

In order to keep up with this growing demand for hotel accommodation an increase in developments has been recorded.

Hotel Investments

4


Due to the search for yields, and the diversifi cation possibilities, investors without a history in the hotel sector are now looking at investment opportunities as well.

These are important reasons why hotel investments reached a record in 2017 with about €1.8bn invested; a remarkable increase of 200% compared to the previous year. Almost three quarters of the total investment took place in Amsterdam, underlining investors belief that this city will remain a key tourist and business destination.

It is noteworthy that one third of all investments came from German investors while the share of Dutch investors was relatively low. One of the reasons for this is that Dutch investors are more used to making investments based on the property value instead of cash fl ow, which gave foreign investors a head start in recent years. Also noteworthy is the increasing activity of investors from Asia, and especially China.

About a quarter of 2017 investment volume was from Asian investors, including the largest deal in 2017, the purchase of DoubleTree by Hilton Amsterdam Central Station for €350m by Chinese investor Anbang Group. This increase in Asian investments is also being seen in other markets such as the UK. The table below details other large hotel investments in the Netherlands.

Traditionally only specialised hotel investors were active in the sector.

AMSTERDAM CITY HARBOUR HOTEL

CROWN PLAZA + HAMPTOM BY HILTON UTRECHT

LEONARDO AMSTEL HOTEL

VAN DER VALK APELDOORN

RENAISSANCE HOTEL AMSTERDAM SCHIPHOL

VEN ROTTERDAM

MARITIM HOTEL

VAN DER VALK EXCLUSIER ZUIDAS

SAX BUILDING ROTTERDAM

VEN - PARK INN BY RADISSO

INDIGO ROYAL PALACE THE HAGUE

POSTILION

HOLIDAY INN EINDHOVEN

HOLIDAY INN EXPRESS

AMRATH UTRECHT

LANDMARK HOTEL OOSTENBURG

OLYMPIC HOTEL

PLAZA HOTEL ALMERE

QO CROWNE PLAZA

MOVENPICK HOTEL DEN HAAG THE HAGUE

NHOW HOTEL

VAN DER VALK DEN HOORN

MELIA

245

328

490

151

250

N/A

579

240

150

476

63

252

180

439

250

300

309

158

288

72

650

140

328

UPSCALE CLASS

UPSCALE CLASS / MIDSSCALE CLASS

UPSCALE CLASS

UPPER MIDSCALE CLASS


LUXURY CLASS

UPSCALE CLASS

UPPER UPSCALE CLASS

N/A

UPSCALE CLASS

UPSCALE CLASS


UPSCALE CLASS

MIDSCALE CLASS

UPSCALE CLASS

UPSCALE CLASS

UPSCALE CLASS

UPSCALE CLASS

UPSCALE CLASS


UPSCALE CLASS


UPSCALE CLASS

2018

2018

2018

2018

2018

N/A

2020

2020

2022

2018

2018

2018

2019

2019

2020

2020

2018

2018

2018

2019

2019

2020

2020

HOTEL

HOTEL CITY

NO. OF ROOMS

NO. OF ROOMS

CLASS

CLASS

OPENING

OPENING

TABLE: LARGEST HOTEL DEVELOPMENTS IN AMSTERDAM

MAP: LARGEST HOTEL DEVELOPMENTS IN AMSTERDAM

GRAPH: HOTEL INVESTMENT VOLUME WENT SKY-HIGH GRAPH: CHINESE AND GERMAN INVESTORS WERE THE MOST ACTIVE PLAYERS ON THE DUTCH HOTEL MARKET IN 2017

UNITED STATES OF AMERICAUNITED KINGDOMSINGAPOREFRANCE

CHINAGERMANY

THE NETHERLANDS

TABLE: MAJOR HOTEL DEVELOPMENTS IN THE REST OF THE NETHERLANDS

DOUBLETREE BY HILTON AMSTERDAM CENTRAAL STATION

AMSTERDAM

NH BARBIZON PALACE AMSTERDAM

HYATT PLACE AMSTERDAM AIRPORT HOTEL

HOOFDDORP

HOTEL NH AMSTERDAM ZUID AMSTERDAM

HOTEL W AMSTERDAM (INCL. THE DUCHESS)

AMSTERDAM

NHOW HOTEL AMSTERDAM

HILTON ROTTERDAM

QUEEN BILDERBERG PORTFOLIO

CONGRES HOTEL OVERHOEKS AMSTERDAM

OLYMPIC HOTEL

CROWNE PLAZA & HAMPTON BY HILTON

AMSTERDAM

UTRECHT

557

268

330

213

238

650

254

1,633

579

309

328

UPSCALE CLASS

UPPER UPSCALE CLASS

UPSCALE CLASS

UPSCALE CLASS

LUXURY CLASS

UPSCALE CLASS

UPPER UPSCALE CLASS

UPSCALE CLASS

UPSCALE CLASS


UPSCALE CLASS / MIDSCALE CLASS

€350M ANBANG GROUP BLACKSTONE

€155.5M DEKA NH HOTELS

€53.8M AVIGNON CAPITALIEN HILLGATE INVESTMENTS

€45M AVIGNON CAPITAL RJB

€260M DEKA STAG EUROPE

€150M AXA IM COD/BEING DEVELOPMENT

€50M (2018) FIRST SPONSOR GROUP N/A

€205M FIRST SPONSOR GROUP GOLDMAN SACHS/KKR

€125M IES IMMOBILIEN ABN AMRO BANK

€46M

€26.4M

ALEX CHANG, KUNSHANG AND WENZHOU TONYONG LOCKS

FIRST SPONSOR GROUP

CHRIS LUKEN

KLEPIERRE

HOTEL CITY ROOMS CLASS PURCHASE PRICE PURCHASER VENDOR

TABLE: LARGEST HOTEL INVESTMENTS 2017

20102010 20132013 2016201620112011

AVERAGE

20142014 2017201720122012 20152015

0

€200M

€800M

€400M

€1000M

€1400M

€1800M

€600M

€1200M

€1600M

€2000M

· VEN - P

ARK INN BY RADISSO

· HOLID

AY IN

N EXPRESS

· LANDMARK HOTE

L OOSTE

NBURG

· AMSTE

RDAM CITY HARBOUR HOTE

L

· MARITI

M HOTEL

· OLY

MPIC HOTEL

· NHOW HOTEL

· VAN DER VA

LK EXCLU

SIEF ZUIDAS

· QO CROWNE PLA

ZA

LEONARDO AMSTE

L HOTE

L · · POSTILLIO

N

· MELIÃ

· RENAISSANCE HOTEL A

MSTERDAM SCHIPHOL

There is a universal expansion in travel accommodation types available to consumers, driven largely by the tastes and demand of ‘millennials’. An example is the increase in boutique hotels (like Generator and Vondel Hotels).

Another trend is blurring hospitality with other uses, allowing operators to better monetise communal space and add vibrancy that can add to the guest experience. Short stay apartments (like Zoku and Element) are an example of blurring with residential

use, while The Student Hotel is a great example of the blurring of lines between the hotel and student housing sector.

Online marketplaces for lodging like Airbnb are already familiar; with Airbnb boasting a market share of approximately 11% of all overnight stays in Amsterdam and around 7% in other cities like The Hague and Rotterdam. In order to manage nuisance and liveability in some areas, municipalities have put restrictions on Airbnb. As of 2019, house owners in Amsterdam are allowed to rent their house for a maximum of 30 days (60 days currently).

This is already the case in Amstelveen, a neighbouring municipality of Amsterdam. In Rotterdam and Utrecht there are initiatives to introduce a maximum of 60 days. This, of course, is positive for the hotel sector as well.

Due to the fact that the hotel investment market is so specialised and perceived to be more risky than commercial investments, typically only investors with extensive knowledge of the sector are active in the market.

Notwithstanding that, we are increasingly seeing new investors enter the market seeking to diversify the product and income mix within their portfolio. And, whilst when compared to bond yields the gross initial

yield of hotels is high, this gap is decreasing as indicated in the graph above. Because demand for hotel investments is higher than current supply, gross initial yields for prime locations like the city centre of Amsterdam fell considerably over the past 12 months and currently stand at 4.25%.

For national investors this is quite a sharp yield compared to other asset classes. However, international investors who are comparing yields across several global

markets, are more accepting of these ‘low’ yields. This is one of the principle reasons why hotel investment has been dominated by international investors over recent years.

Due to the low supply of hotel investment opportunities in prime Amsterdam locations, investors are increasingly looking towards other markets causing yield compression in these locations as well. Prime gross yields in Utrecht for example have sharpened to 6.0% from 8.0% in 2014.

5


Yields Outlook

6


Due to the growing number of visitors and the limited growth of hotel developments, Savills expects that room occupancy and rates will keep increasing in the years to come. This is positive for hotel turnover, which makes the hotel sector very appealing.

In the search for yield we see a growing interest in the hotel market by investors who may never have invested in the hotel market previously. Due to this growing demand we expect that yields will compress even further. This in turn will make the option of sale-and-lease-back increasingly interesting for hotel operators who own the property. For these reasons we expect a substantial investment volume in 2018, again dominated by international investors.

TrendsHotel market

“The increase in the number of hotel rooms in Amsterdam is considerable, however the increase in the number of tourists is increasing even faster, which strengthens hotel investment fundamentals.”

- Bas Wilberts

3 Tips for Investors

1. Value hotels on cash fl ow and operator, not on the value of the bricks-and-mortar

2. Food & bevarages deserve a separate assessment

3. Hotels on secondary locations are becoming more stable due to the spread of tourism. This off ers opportunities.

GRAPH: THE YIELD GAP IS DECREASING

PRIME HOTEL

YIELD GAP

BOND YIELDS NL (10YR)

2013 2014 2015 2016 2017 Q40%

1%

2%

3%

4%

5%

5%

6%

6%

7%


keyfi ndingscall us at +31 (0) 20 301 2000 Property starts with people

Bas WilbertsBas WilbertsHead of Alternative Head of Alternative [email protected]@savills.nl+31 (0) 20 301 2011+31 (0) 20 301 2011

Marco PeetsmaMarco PeetsmaAssociateAssociateAlternative InvestmentsAlternative [email protected]@savills.nl+31 (0) 20 301 2034+31 (0) 20 301 2034

Robert stapletonRobert stapletonDirector Director Savills HotelsSavills [email protected]@savills.com+44 (0) 20 7409 8029+44 (0) 20 7409 8029

Adriaan TervoortAdriaan TervoortDirectorDirectorSavills ValuationsSavills [email protected]@savills.nl+31 (0) 20 301 2020+31 (0) 20 301 2020

Jordy KleemansJordy KleemansHead of Research & Head of Research & [email protected]@savills.nl+31 (0) 20 301 2000+31 (0) 20 301 2000

Savills plcSavills plc Savills is a leading global real estate service provider listed on the London Stock Exchange. The company established in 1855, has a rich heritage with unrivalled growth. Savills is a leading global real estate service provider listed on the London Stock Exchange. The company established in 1855, has a rich heritage with unrivalled growth. It is a company that leads rather than follows, and now has over 700 offi ces and associates throughout the Americas, Europe, Asia Pacifi c, Africa and the Middle East.It is a company that leads rather than follows, and now has over 700 offi ces and associates throughout the Americas, Europe, Asia Pacifi c, Africa and the Middle East.

This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent. Whilst every eff ort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential agreement or other document without prior consent. Whilst every eff ort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Research.loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Research.

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savills.nl/research

Focus on AmsterdamMost developments are taking place in the Amsterdam area, where approximately 4,000 rooms will enter the market in 2018. In the period 2019-2020 another 3,000 rooms are expected to be added.

Large volume developmentsNew hotel developments are becoming larger, which makes these developments interesting for investors who are used to large investment volumes.

Record high investmentsHotel investments reached a record in 2017 with about €1.8bn invested; a remarkable increase of 200% compared to the previous year.

Foreign interestGerman and Asian investors are most active on the Dutch hotel market. Only a small share of the investment volume was from Dutch investors.

Expanding portfoliosNew investors are entering the market, seeking to diversify the product and income mix within their portfolio.

Interesting YieldGross initial yield for prime locations fell considerably over the past 12 months and currently stand at 4.25%

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