"We have really studied the hotel market in recent years and have gained experience in this area," says Olivier De Greef, who, as Property Operations Director, oversees the Hotel & Leisure department. "We are now ready to offer our services to local and international investors."
Hotel property management dates back to 2017 for BNPPRE. It was appointed property manager of the foreign properties of the French specialised investment fund Covivio Hotels, which owns some 20 hotels and holiday parks in the Netherlands and Belgium, among other things. A reporting tool was developed especially for Covivio to analyse mandates and contract conditions, to track leases, to monitor finances and performance, and to create investment plans. "A risk map of the legal provisions relevant to operating is also very important," stresses Olivier De Greef. "Hotel operators must meet all kinds of legal requirements. Every hotel we manage is visited by our team twice a year for analysis."
BNPPRE also performs assignments for hotels in the portfolio of major institutional investors such as Axa IM-Real Assets and DWS Alternatives GMBH. But the real estate consultant also supports specialised players such as Atream, which has holiday parks in Belgium and the Netherlands in its portfolio. BNPPRE manages a total of 43 hotels in Belgium, covering more than 5,960 rooms in total and seven holiday parks representing almost 3,000 cottages.
Hotels are not offices
"For institutional investors, hotel real estate is one of the possible alternative investments when considering diversification. But hotels are not offices or retail. They require a different approach. Offices are considered a financial product that will generate a certain return over a specified period of time. In recent years, specialised investors that invest specifically in hotels and holiday parks have also appeared in the market, particularly in France. They take a different approach, aware that hotels do not operate with leases based on index-linked fixed rent. Fixed leases exist, but variable rents are more common. Real estate investors must therefore have a good understanding of what is happening in the sector, what is on offer, where competition is located and where projects are going to emerge in the future. The hotel market rides on these waves. This is more difficult to align with an institutional investor’s vision."
Lower-level occupancy
Olivier De Greef also stressed that the hotel market was able to regain growth just before the pandemic broke out, following the terrorist attacks in Brussels and
Paris. "COVID-19 is a real catastrophe for the Brussels hotel sector. At present, the occupancy rate is between five and ten percent. Operators with several hotels in a defined area have decided to group their guests in one hotel. But even then, the occupancy rate is barely more than a quarter. It is an unsustainable situation. Nevertheless, most still choose to keep their hotel open. It is not always possible to close a building, technically speaking. In addition, operators fear that by closing, they will miss the resurgence and that their customers will book with the competition. Because bookings have already been made for the future."
When will the resurgence come?
"Large hotel groups are in some cases better equipped to face the crisis, but large groups and family operators are both struggling. "Even with variable leases, rental charges weigh heavily on operators. Similarly to commercial real estate, operators and owners are coming to the table to find a solution. In the meantime, some are asking when the market will get back to normal again. The most optimistic answer is 2023, but it is more likely to be 2024. In this context, the vast pipeline of current projects in Brussels is not an immediate problem. Most projects will only be marketed in the longer term. In the meantime, developers continue to enter into contracts with operators and specialised investors still have transactions in the pipeline. It is reason for optimism and to believe that the market will be able to bounce back quite quickly after COVID-19."
Interview with Olivier De Greef, published in Expertisenews on April 2nd 2021 © Martijn Reviers
