CBRE: Rising interest in Nordic luxury hotel market attracts international brands
The Nordic hotel market is experiencing a surge in interest from international brands and operators, particularly within the luxury segment. Domestic business travel has rebounded to pre-pandemic levels, matching the traffic seen in 2019. Meanwhile, leisure travel has swiftly recovered post-COVID-19 and remains robust, with travelers increasingly willing to pay premium rates for exclusive accommodations. This convergence of price-insensitive leisure guests and steady business traffic is setting the stage for significant profitability in the region’s hotels.
Recent analysis shows that a selection of luxury hotels across the Nordics achieved an average Revenue Per Available Room (RevPAR) of EUR 358 during the summer period, marking a 14% increase compared to the same timeframe in 2023. The average Daily Rate (ADR) for these hotels reached EUR 460 this summer. Notably, the two largest cities in the region saw even more substantial increases in RevPAR, with Stockholm reporting a rise of 21% and Copenhagen 22%.
“This trend is promising news for hoteliers in the region,” industry experts noted. “There has been a notable uptick in interest from international luxury brands and property developers. Additionally, travelers are increasingly seeking unique and exclusive experiences, particularly in areas within the Arctic Circle in Finland, Norway, and Sweden.”
Following a sluggish hotel development phase during the pandemic, many cities are now witnessing muted supply growth, despite rising demand. With an influx of guests, it is anticipated that room rates will continue to climb across the market, not just in the luxury segment. This upward pressure on rates is expected to influence developer models and pave the way for exciting new hotel openings in the future.
On the investment front, Nordic hotel transactions totaled €318 million from January to August 2024, reflecting a 3.6% decrease from the previous year. While the number of transactions increased from 15 to 17, the average deal size was smaller. The most significant transaction involved NREP’s acquisition of the Comfort Hotel Karl Johan in Oslo, with CBRE advising the seller. In Norway, Pellerin acquired 50% of the Clarion Hotel The Edge in Tromsø, while Njord Securities, along with Glastad Holding and Heimr, purchased the Savoy Hotel in Oslo, planning a refurbishment.
In Sweden, noteworthy transactions in 2024 included Balder’s acquisition of Hotel Karlatornet and Sinoma Fastighets AB’s purchase of the property housing First Hotel G, both located in Gothenburg.
Amidst this market activity, the macroeconomic landscape appears to be improving, with inflation in the Eurozone falling to a three-year low of 2.2%. The Swedish central bank has commenced interest rate cuts, with further reductions anticipated in 2024. Although the Norwegian central bank is likely to maintain higher interest rates for an extended period, overall investor sentiment seems more positive. Most available capital is now targeting value-add opportunities, while interest in core investments remains limited.
Source: CBRE
