INTERNATIONAL INVESTORS SET TO DOMINATE ITALIAN HOTEL MARKET IN 2015
Francesco Calia Appointed to Lead CBRE Hotels’ in Italy
2014 saw the total volume of hotel transactions in Italy exceed €500 million, confirming a positive trend which is likely to continue in 2015 as strong international investor interest for the Italian hotel market continues to gain momentum.
The hotel market revival in Italy is being driven by a diverse base of foreign investors with buyers from the Middle East, Asia, North America and Europe. Recent analysis by CBRE estimated that 2015 will see €20 billion of capital into European hotels, fuelled by the liberalisation of domestic controls governing outbound investment. North American private equity funds are also now investing substantial resources in Europe; investment in all European property sectors by North American capital nearly doubled in 2014 to €42 billion and the weak position of the Euro against the US dollar will lead 2015 investment to exceed 2014 levels.
Investors are seeking comfort in the improving general national economic climate (GNP) which is expected to grow 0.5% after a stagnation and recession period which lasted five years. Increased political stability and the recent government initiatives such as tax cuts for workers and businesses, labor reform are helping to relieve the banking system from the burden of bad debt and to stimulate and sustain economic recovery.
Trading performance across many Italian markets is now fixed on a trajectory of growth. Strong leisure demand is aiding hikes in occupancy and some markets including Milan are seeing impressive gains in rate. Whilst total revenue and bottom-line performance is generally still below pre-recession peaks, this suggests there is substantial upside for further profit growth and many investors have spotted the opportunity to drive impressive returns on key assets in prime locations. This is reflected in the year-on-year increase in Italian hotel transaction volumes, surpassing €500m in 2014. CBRE Hotels expects that transaction volumes for Italy will heighten even further in 2015.
The combined effect of all these factors has established the interest in the Italian hotel market which is growing among international investors targeting alternative investments and partnerships with local associates. Compared to other asset classes, hotels are offering investors the benefit of attractive returns, and a significant upside based on the possibility to add value. There are currently few distressed real estate portfolios available on the market, but the Bad Bank project will let new large investment opportunities emerge. These will be originated from the sizable volume of non-performing loans, which has been estimated in the region of €330 billion of bad or distressed debt. The execution of optimal strategies to extract values from non-performing loans and the management of structured sale processes are key to achieving success.
As part of an-going recruitment drive to bolster the Italian hotels business and offer the best service and advice to clients, CBRE Hotels has appointed Francesco Calia to lead the hotels business in Italy.
Francesco will be based in Milan and will oversee the development of the hotels team in Italy. Francesco joins CBRE from Cushman & Wakefield where he was a senior member of the company’s Italian Hospitality team for six years. Prior to which he was at Arthur Andersen and Deloitte for nine years, participating in a number of engagements and advisory work on major hotel transactions. His expertise extends across Italy and the Mediterranean and he brings with him a comprehensive range of services in the real estate and hospitality sectors, including strategic advice and consultancy, transaction services, operator selection and valuation.
Our ability to attract a leader of Francesco’s calibre to CBRE Hotels is indicative of the way we have grown in stature and depth in the marketplace. Francesco brings to the role a wealth of sector experience and he will reinforce our hotel capabilities in one of our key markets
It is an exciting time to join CBRE’s hotels team. The Italian hotel market has registered robust increases in demand and trading performance in the past few years. Together with high volumes of tourists each year, the market continues to attract international investor interest. Italy experiences a lack of international hotel operating chains compared with other prime markets in Europe. The interest from international and local operators is high to find new opportunities under lease and management contracts and our international capabilities ensure we are well placed to offer the best advice.
Francesco’s appointment will further strengthen CBRE’s hotel offer which has seen a number of recent strategic hires to bolster the 80 strong international team based across EMEA. These include the recent appointment of Jileen Loo who has joined the team to focus on European-bound global capital, Rob Seabrook to lead UK Brokerage.