With Accor buying 97 of its managed hotels, continental portfolios being snapped up and rumors of IHG rejecting a $10-billion takeover bid, European investment is reaching new heights.

　　Hotel investors are apparently growing increasingly hungry for European hotel and hotel companies.

　　During the last few weeks Europe has experienced plenty of activity, including:

　　Accor SA, following its decision last November to split its business into two units—one focusing on franchising and management and the other on ownership and investment in hotel assets—announced on 27 May that its HotelInvest wing purchased two real-estate portfolios (12,838 keys) representing 86 and 11 hotels, respectively, for approximately €900 million ($1.2 billion). The properties are in Germany, The Netherlands and Switzerland. Accor did not reply to messages by press time.

　　Sky News reported on 24 May that U.K.-based InterContinental Hotels Group rejected a £6-billion ($10.1-billion) takeover bid from an unidentified buyer, rumored to be Starwood Hotels & Resorts Worldwide or Starwood Capital Group, a private-equity firm unrelated to Starwood Hotels. According to the London Stock Exchange, IHG’s market cap rate is valued at £5.8 billion ($9.7 billion).

　　In a separate deal, Starwood Hotels is in discussions to purchase Germany-based Design Hotels, according to Hotel Analyst (subscription required). The board of directors of the independent-hotel representation brand, with approximately 250 properties in more than 40 countries, is reportedly mulling the deal.

　　On 1 May, JLL brokered an 18-asset, pan-European hotel portfolio on behalf of Ivanhoé Cambridge to Apollo Management International, a subsidiary of Apollo Global Management. Propertyweek.com reported the deal is worth approximately €425 million ($579 million). The acquisition comprises 3,878 keys in 14 cities in Austria, Belgium, France, Germany, The Netherlands and Spain.

　　On 16 April, Swedish real estate company Fastighets AB Balder bought a portfolio of 14 hotels (2,430 keys) from Swedish company Pandox for 2.2 billion Swedish krona ($335 million).

　　On the heels of the rumored takeover bid, shares in IHG listed on the London Stock Exchange jumped 5.7% to £23.53 ($39.62) per share at press time (27 May). On the New York Stock Exchange, IHG shares had jumped approximately 4.2% at 11 a.m. EST.

　　On 2 May, IHG reported global revenue per available room growth of 6% for its first quarter 2014, driven by a 2.4-percentage-point increase in occupancy and a 1.9% rise in average daily rate.

　　A spokesman for IHG declined to comment on the reported bid. Starwood Hotels did not return messages by press time.

　　Shares in Starwood Hotels & Resorts were up approximately 1% at 11 a.m. EST on 27 May.

　　Hunger for deals

　　Sources said there is a great deal of appetite for large European portfolio deals, but the biggest problem is a lack of product to acquire.

　　“We’ve seen increasing appetite from investors … due to (their) ability to invest in real estate and operating platforms. U.S. (investors are interested) from the operational side, where they see opportunity,” said Christoph Härle, JLL’s CEO, Europe, Middle East and Africa, hotels and hospitality. “It is not a demand challenge (in Europe). The operational numbers are making the right turns, the U.S. is getting pricier, the debt environment is loosening (and there is more) non-traditional lending. Europe is a great opportunity.”

　　Elizabeth Winkle, managing director of STR Global, a sister company to HNN, agreed available supply remains a problem, especially for portfolio transactions.

　　Härle said the window for European transactions to occur is a little less than a year, perhaps nine months.

　　“Private equity is active in both sides of the table,” Härle said.

　　Härle suggested that during the next one to two years there will be less portfolio activity across Europe, mainly the result of less availability, although there will be an increased number of single-asset transactions and thus a larger overall number of transactions.

　　“2014 and 2015 will clearly be very strong years, as might 2016. It is going to be very interesting to watch,” he said.

　　The potential Starwood Hotels/IHG tie-up was previously muted in 2001 when current Starwood Capital chairman Barry Sternlicht was leading the Starwood Hotels portfolio, according to sources.

　　“There would be economies and marketing benefits from a consolidation if, indeed, Starwood is the suitor. As hotel trading is improving in the U.S. and U.K. markets, with Europe likely to follow suit in the coming years, there’d be benefits to coming together in a rising market,” said Jonathan Langston, senior director of business advisory company CBRE Hotels.

　　Starwood Hotels manages approximately 1,200 properties in more than 100 countries across nine brands, including St. Regis, W Hotels, Westin, Le Meridien and Sheraton.

　　IHG manages approximately 4,600 properties in almost 100 countries across 11 brands, including InterContinental, Crowne Plaza, Hualuxe and Holiday Inn.

　　London sunshine

　　IHG expects a follow-up bid would soon come, according to Sky News. The bids are likely fueled by U.S. companies’ appetites to move tax bases to the United Kingdom. That business tactic that has been widely discussed and criticized in the U.K. in recent weeks in regards to the attempted takeover of drug giant AstraZeneca by U.S. peer Pfizer. That failed £70-billion ($118-billion) deal was so controversial Pfizer’s CEO was brought on two occasions to speak before the U.K. parliament.

　　“At the moment, it is very attractive for any U.S.-based company to have a U.K. tax domicile. A merger with a U.K.-based company would create the opportunity for tax inversion,” Winkle said.

　　Winkle said the IHG rumor is a result of the industry environment.

　　“IHG is a well-performing and highly regarded international brand, and as there has been a great deal of speculation lately regarding possible industry consolidation through mergers and acquisition, therefore a rumor such as this does not come as a surprise,” Winkle added.

　　Many likely-to-be-transacted assets are out of receivership, said sources, and many of these and additional assets have been held by banks for far longer than were originally anticipated. That does not necessarily mean, however, that they are all available.

　　“Spain is a great example, with everyone highly excited and ready to deploy large capital but no one playing on the other side,” Härle said.