This is the latest in a series of MIPIM Connect session reports from partner schools. In this post, France’s Paris 1 Panthéon Sorbonne covers the Investment Trends in Hospitality session, with Johanna Capoani, Head of Hospitality Portfolio Management at Swiss Life.
Capoani began with an overview of the post-Covid hotel industry. March was already very stressed, then there was almost no business in April and May.
GDP decline was less important during the dot-com crisis (2001) than during the financial crisis of 2008-2009. Since then, there has been a global restructuring of hotels, with a trend of standardisation into chains (mostly in the budget class), said Capoani.
The REVPAR index – an indicator taking into account occupancy and average rate – is a tool which allows for cross-industry comparisons, to which Capoani regularly referred during the session.
Swiss Life is a wide pan-European Asset Manager for third-party as well as insurance companies, managing €17.8 bn euros of assets in France, of which hotels represent 9%. Investments cover France, Germany, Italy and Spain, said Capoani.
The impact of the pandemic on hotels
Stressing her strong belief in the fundamentals of the hotel class, Capoani said that despite the recent huge shock for the industry, she is still confident about the industry in the long run.
“The sector is usually highly affected by market shocks, even during the terrorist attacks. The market was pretty heated – with 25% of REVPAR increase in January and February” – Capoani
In France, there was no decree imposing to close hotels, so that they could instead accommodate medical staff. So although hotels remained open in France, occupancy rates remained low. In Italy and Spain, hotels were closed by governments.
What is the solution to overcome the crisis? The question is how the sector is going to be impacted. We should expect recently-increased values to be repriced, said Capoani.
“It’s too early to establish the real impact of the pandemic and the impact it would have. Not only hotels are impacted: retail and offices as well” – Capoani
In terms of rent adjustments, an effort needs to be made by all involved: governments, banks, insurers, not only landlords. Swiss Life have decided to postpone rents, but there should be a solution for repayment schedules in a long term.
From an investor perspective, Capoani noted incredible support in all the countries Swiss Life was invested. But it’s still too soon to foresee how tourism will bounce back. Maybe the state should come in as new collateral for investments?
The next deals in Southern Europe remain in the pipeline for Swiss Life. These will close as soon as borders and hotels reopen. No deals have yet been cancelled from the books. Repricing was important. Hotel investors will now be seeking for premiums in terms of yield.
