Hotels & Hospitality Hotel Intelligence Netherlands 2013 The Dutch hotel investment market was very active in 2012 with single transaction volumes amounting to €200 million. Investor interest was particular high for branded hotels in Amsterdam and various upscale hotels received new owners such as the InterContinental Amstel, the American Hotel Amsterdam and the MGallery The Convent Hotel Amsterdam.

2 Hotel Intelligence: Netherlands

Table of Contents

Authors

Introduction

3

Dutch economy entering recession in 2012

4

Robust growth in foreign arrivals

5

European owners remain dominant

6

Transaction activity increased in 2012

7

German funds focusing on quality assets in Amsterdam

8

Josef Filser Associate, EMEA [email protected]

Marcus Linden Research Assistant, EMEA [email protected]

Jones Lang LaSalle’s Hotels & Hospitality Group serves as the hospitality industry’s global leader in real estate services for luxury, upscale, select service and budget hotels; timeshare and fractional ownership properties; convention centers; mixed-use developments and other hospitality properties. The firm’s more than 265 dedicated hotel and hospitality experts partner with investors and owner/operators around the globe to support and shape investment strategies that deliver maximum value throughout the entire lifecycle of an asset. In the last five years, the team completed more transactions than any other hotels and hospitality real estate advisor in the world totaling nearly US$25 billion, while also completing approximately 4,000 advisory and valuation assignments. The group’s hotels and hospitality specialists provide independent and expert advice to clients, backed by industry-leading research. For more news, videos and research from Jones Lang LaSalle’s Hotels & Hospitality Group, please visit: www.jll.com/hospitality

Hotel Intelligence: Netherlands 3

Introduction

Economy: Due to the effects of the Euro Crisis and the government’s austerity measures, the Dutch economy slipped into recession in 2012, GDP contracting by 1% year on year. The current government aims to continue its fiscal tightening and has announced to make an extra €16 billion in savings by 2017. These measures are expected to constrain near term economic growth which is forecasted at -1.0% in 2013. An economic improvement is expected in 2014 with GDP growth forecasted at 0.6%. Tourism: The Netherlands attracted a record of 31.4 million visitors in 2012, with the majority accounted for by domestic visitation (63%). Foreign arrivals increased by 3.9% in 2012 due to stable growth in key feeder markets including Germany, the UK and Belgium. The highest growth rates in foreign arrivals were reported from emerging markets in Asia and South America. The Netherlands Board of Tourism and Conventions (NBTC) forecasts foreign arrivals to grow by 2.9% year on year in 2013. Investment Market: The hotel investment market in 2012 was very active with transaction volumes amounting to €200 million (single asset transactions only). This was fuelled by both domestic investors but also a growing amount of German funds that have invested in particular in the Amsterdam market. In 2012, a number of hotels also changed owners as part of portfolio deals including the InterContinental Amstel Amsterdam and the MGallery Convent Hotel in Amsterdam.

4 Hotel Intelligence: Netherlands

Dutch economy entering recession in 2012 Netherlands: Economic Indicators 2006

2008

2009

2010

2011

2012

2013F

2014F

2015F

3.9%

1.8%

-3.5%

1.6%

1.1%

-1.0%

-1.0%

0.6%

1.3%

1.6%

2.5%

1.2%

1.3%

2.3%

2.5%

2.4%

1.9%

2.1%

4.5%

3.9%

4.8%

5.5%

5.3%

6.4%

7.1%

6.3%

6.3%

0.73

0.68

0.72

0.76

0.77

0.76

0.79

0.79

0.73

0.5%

0.2%

0.6%

-5.4%

-5.0%

-4.6%

-4.4%

-4.4%

-4.2%

-3.8%

9.3%

6.7%

4.3%

4.9%

7.7%

9.7%

7.8%

6.4%

6.6%

6.6%

Real GDP growth

3.5%

Consumer price inflation (av.)

1.2%

Unemployment rate

5.5%

Exchange rate LCU/$ (av.)

0.80

Fiscal Balance (% of GDP) Current account balance (% GDP)

2007

Source: Global Insight, May 2013

The Netherlands has a population of approximately 16.7 million. The country has the 18th largest economy in the world and is known for its dynamic business environment, low unemployment and excellent educational system. The economy has consistently posted low inflation rates and current account surpluses. In 2012, the World Economic Forum ranked the Netherlands in fifth position in terms of global competitiveness, an improvement from 8th place in 2011. The country benefits from highly sophisticated international companies, which are strong in the food processing, chemicals, petroleum refining and electrical machinery sectors. The service sector accounts for more than 70% of GDP output. The manufacturing sector accounts for roughly 18% of GDP and has recently struggled in light of growing competition from Asia and Central and Eastern Europe. Netherlands: GDP Growth

The Netherlands is one of the most open economies in the world. As a result, its economic performance and risks are largely related to global and, in particular, EU economic developments. As a result, the Dutch economy has been hit hard by the Euro Crisis and GDP contracted by 1.0% year on year in 2012. This was exasperated by the austerity measures that have led to a decline in public and private spending. Unemployment has also risen, reaching a seven year high in October 2012.

6% 4% 2% 0% -2% -4% -6% 2005

2006

2007

2008

2009

2010

European Union Source: Global Insight, May 2013

2011

2012

2013F 2014F 2015F

Netherlands

According to latest indicators, economic activity is expected to remain weak and IHS Global Insight forecasts a -1.0% fall in GDP in 2013. Consumer confidence remains weak and household consumption is expected to remain fragile in the short to medium term. A more pronounced economic improvement is expected in 2014 with GDP growth forecasted at 0.6%.

Hotel Intelligence: Netherlands 5

Robust growth in foreign arrivals According to the World Travel & Tourism Council (WTTC) the total contribution of the Dutch Travel and Tourism industry to GDP is 5.8% (as of 2011). It is forecast to grow by 3.4% per annum between 2013 and 2022. The tourism industry directly supports about 500,000 jobs or 6.8% of total employment. The Netherlands attracted a record of 31.4 million arrivals in 2012, reflecting a 2.3% growth on figures reported in 2011. This growth was primarily fuelled by a 3.9% increase in foreign arrivals whereas domestic visitation increased by only 1.4%. Overall, tourism demand has picked up since 2009 with total arrivals growing by a yearly average of 2.7%. Netherlands: Tourism Demand 90,000 85,000

Tourist Arrivals

30,000

80,000

25,000

75,000 20,000

70,000

15,000

65,000

10,000

Tourist Overnight Stays

35,000

Netherlands: Foreign Source Markets Germany 25%

26%

Other Europe Great Britain Belgium

7%

USA

8%

Asia

8% 14%

12%

Other

Source: Global Insight, December 2012

The most popular tourist destination is Amsterdam which is situated in the province of Noord-Holland. The city is the financial and cultural capital of the Netherlands and one of the busiest tourist destinations in Europe. Amsterdam attracts the bulk of international visitors to the Netherlands, the majority of whom originate from Europe, while the largest number of nonEuropean visitors is from the USA. Amsterdam’s main attractions are its historic canals, the Rijksmuseum, the Van Gogh Museum and the House of Anne Frank.

60,000 2004 2005 2006 2007 2008 2009 2010 2011 2012

Arrivals

Overnight Stays

Netherlands: Main Tourist Areas

Source: Centraal Bureau voor Statistiek

8,000 6,000

(000's)

Although the Netherlands has grown in popularity among foreign tourists it remains primarily a domestic destination with Dutch arrivals accounting for a majority of 63% of total demand. The country’s major foreign feeder markets are Germany, Belgium, Great Britain and France. Similar to other European destinations there has been a strong growth in overnight demand from emerging economies such as China (+23% in 2012), India (+16%) Brazil (+9%) and Russia (+5%).

10,000

4,000 2,000 0 Noord-Holland Zuid-Holland 2009

Source: Centraal Bureau voor Statistiek

Limburg 2010

Gelderland 2011

NoordBrabant

6 Hotel Intelligence: Netherlands

The second most visited province in the Netherlands is ZuidHolland, home to cities such as Rotterdam and The Hague. The city of Rotterdam attracts around 600,000 tourists a year, and is popular because of its contemporary architecture, good shopping and diverse choice of museums. Situated on the banks of the river Nieuwe Maas, the port of Rotterdam is the largest in Europe and one of the world’s busiest ports. The city has exceptional architecture and culture, and hosts a variety of attractions including festivals, museums and shopping. The Hague is the third largest city in the Netherlands, and attracts approximately 643,000 tourists per annum. The city has always been the centre of politics in the Netherlands, and tourists are attracted to its historic buildings, which contain a wealth of Dutch political history. Tourists are also attracted to a variety of beaches, together with the city’s art, culture and 30 museums.

European owners remain dominant Jones Lang LaSalle Hotels & Hospitality Group has undertaken a survey of 4- and 5-star hotels in Amsterdam, comprising 12,400 rooms, to analyse the current ownership structure in terms of nationality and owner type. Amsterdam: Hotel Ownership by Nationality 4% 19% Europe 51% 26%

Domestic US Asia

Source: Jones Lang LaSalle

European owners continue to dominate the quality hotel market in Amsterdam with a 51% share of total upscale hotel bed stock. European investors, especially from Germany, have been active buyers of hotel real estate in the Netherlands. Union Investment for example had bought the recently opened, 207-room Crowne Plaza Amsterdam South hotel in 2011, while Deka Immobilien bought the 175-room American Hotel at Leidsekade 97, Amsterdam in a sale and leaseback agreement on behalf of its sister company WestInvest Gesellschaft für Investmentfonds. Domestic owners are the second largest group of hotel owners with 26% of Amsterdam’s upscale hotel bed stock. High-networth-individuals (HNWI’s) but also Dutch property companies are the principal domestic owners of hotel real estate in the upscale segment. The third largest group of hotel owners come from the United States (19% market share of upscale hotel bed stock). US investors, primarily private equity firms, have been relatively active in the Amsterdam market. This was driven by US private equity group Blackstone purchasing the Mint portfolio for around €698 million in 2011. The portfolio included the Mint Hotel in Amsterdam, which reopened as a Doubletree by Hilton in 2012. In 2012, US REIT Host Hotels also acquired a share of the Renaissance Amsterdam as part of a larger Marrriott portfolio. The hotel was sold by Goldman Sachs Whitehall Fund to a joint venture between GIC Real Estate (48%), ABP Investments (20%) and Host Hotels & Resorts (32%).

Hotel Intelligence: Netherlands 7

Amsterdam: Hotel Ownership by Investor Type

Private Equity firms 14%

HNWIs 11%

Institutional Investors 10%

PPHE Hotel Group is also a key player and expanded its presence after acquiring in May 2012 the remaining 50% interests in the Park Plaza Amsterdam Airport, Park Plaza Victoria Amsterdam and Park Plaza Utrecht and art'otel amsterdam project (development project).

Private Companies 6% Investment Funds 4%

The other large group of hotel owners are private equity firms, which currently account for 14% of the upscale hotel bed stock. The remainder of the market is dispersed amongst a wide variety of owners. These include HNWIs, who have increased their presence and now own 11% of the upscale hotel market.

Property Companies 2% Developers 2% REITs 2%

Hotel Operators 49%

Source: Jones Lang LaSalle

Transaction activity increased in 2012

Growth in investment activity could also be seen from the Middle East, although to a lesser extent. In 2012, a Middle Eastern HNWI from Qatar had bought a European portfolio of six InterContinental hotels throughout Europe from Toufic Aboukhater. The properties were sold for a confidential price and included the InterContinental Amstel Amsterdam.

The financial crisis that started in 2008 had a profound impact on hotel investment activity in 2009. This was due to an economic contraction and a reduction in debt liquidity and investor confidence. Volumes dropped sharply and the market only witnessed two hotel sales in 2009.

Hotel operators currently own 49% of Amsterdam’s upscale hotel market. NH Hoteles are one of the key players, owning a total of five hotels. Netherlands: Single Hotel Asset Transactions Hotel 2008 Dylan Hotel Conservatorium Crowne Plaza Sofitel The Grand

Location

Sale Price (€m) Grade

Rooms

Price/Rm (€)

Buyer Origin

Amsterdam Amsterdam Amsterdam Amsterdam

26.5 50 72 36

5 5 4 5

41 130 270 106

646,000 385,000 267,000 340,000

Europe Middle East Asia/Europe/US Europe/Middle East

The Hague

18

4

216

82,000

Europe

Breda

9.5

4

88

108,000

Netherlands

2009 Novotel World Forum Apollo Hotel Breda City Centre 2010 Hotel Symphony

Amsterdam

-

-

205

-

Holiday Inn Amsterdam Schiphol

Amsterdam

30

4

342

88,000

UK

Austria

Crowne Plaza Amsterdam South

Amsterdam

29

4

207

140,000

Germany

Mövenpick Hotel´s-Hertogenbosch/ Den Bosch

Den Bosch

-

4

92

43,000

Netherlands

Holiday Inn Eindhoven

Eindhoven

22.5

4

206

109,000

UK

American Hotel Amsterdam

Amsterdam

58.5

4

175

334,000

Germany

2011

2012

Tulip Inn Amsterdam Centre

Amsterdam

Confidential

3

110

Confidential

Domestic

SS Rotterdam Cruise Hotel

Rotterdam

29.9

4

254

118,000

Domestic

The Convent Hotel Amsterdam

Amsterdam

23.5

4

148

159,000

Europe

Motel One (Development)

Amsterdam

Confidential

Budget

315

Confidential

Source: Jones Lang LaSalle

Germany

8 Hotel Intelligence: Netherlands

Transaction activity remained relatively subdued in 2010. During this year the, Hotel Symphony was sold for an undisclosed sum to the Vienna listed property company UBM Realitätenentwicklung and the Holiday Inn Amsterdam Schiphol was acquired by Park Plaza for €30 million. In 2011, the hotel transaction market started to accelerate. This was driven by the sale of two large European hotel portfolios that included two Dutch hotels. One of the portfolios was the European InterContinental portfolio of seven properties located throughout Europe. This included the InterContinental Amstel Amsterdam, which was sold to HNWI Toufic Aboukhater. The second hotel portfolio was the Mint Hotel Group, including the Mint Hotel in Amsterdam, which was acquired by Blackstone. In terms of single-asset transactions, the Amsterdam market saw the sale of the Crowne Plaza South for €29 million to the German open-ended fund, Union Investment and the hotel Mövenpick Hotel Hertogenbosch, which was sold by WestFonds Immobilien-Anlagegesellschaft mbH to a local property company for an undisclosed sum. Healthy and diversified market fundamentals have supported hotel transaction activity in 2012 and hotel investment volumes totalled €200 million. In Amsterdam a total of 5 hotels received new owners. In the luxury segment, the InterContinental Amstel Amsterdam was acquired by a HNWI from the Middle East. The hotel was sold by Toufic Aboukhater as part of a wider European InterContinental portfolio of 6 hotels. In the 4-star segment, the MGallery Convent Hotel in Amsterdam was acquired together with the MGallery Hotel Mondial Am Dom Cologne by Internos Real Investors for €44 million under a sale-and-variable leaseback agreement. Dutch based Hampshire Hospitality also sold the Holiday Inn Eindhoven and the American Hotel in Amsterdam to Invesco Real Estate and WestInvest Gesellschaft für Investmentfonds mbH for €22.5 million and €58.5 million respectively. Union Investment also acquired a 315 room Motel One development in Amsterdam for a confidential price subject to a 25 years lease agreement. The hotel was developed and sold by Dutch based Cradle of Development (COD). The hotel will be located in a central location besides the congress centre and Amsterdam RAI fairground and is planned to open in 2015.

German funds focusing on quality assets in Amsterdam Despite a recession in Europe and the on-going uncertainty, investor interest remained high for hotels in the Netherlands, particularly for quality hotels in Amsterdam. These 4 and 5 star hotels in the capital, although do showing signs of weakness in trading performance (RevPAR decline of -0.5% in 2012), have overall weathered the Euro Crisis surprisingly well achieving a high average occupancy of 77% for the whole of 2012. In 2013, we expect sustained levels of investment activity despite challenging economic conditions. This will be fuelled by German funds and institutional investors that continue to diversify into hotel real estate with a strong focus on stable markets such as the Netherlands. These risk averse investors have a particularly strong appetite for prime property in Amsterdam. The market’s buoyancy is also reflected in many operators planning to further expand or enter the Dutch hotel market. Hyatt for example plans to open its second hotel in Amsterdam with the 330 bedroom Hyatt Place Amsterdam Airport. Scheduled to open by the end of 2013 the hotel will be the first Hyatt Place in Europe. Hilton also plans to open a Waldorf Astoria in 2014 and Motel One its first hotel in Amsterdam in 2015. Trading fundamentals in Amsterdam are also expected to hold up in 2013, supported by many festivities including the 400th anniversary of the canals and the 125th anniversary of the city’s concert hall and the reopening of some of the most renowned museums. This will be supported by robust levels of leisure tourism with a growing amount of overseas visitors from emerging economies.

Hotel Intelligence: Netherlands

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10 Hotel Intelligence: Netherlands

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