With the Middle Eastern investment community maturing and the Chinese economy showing constraints, expect to see an impressive influx of Asian capital flowing through Europe.

Asian and Middle Eastern money into the European hotel landscape is set to increase dramatically, even more so than it already has, and is based on long-term views, asset appreciation and yield stabilization, according to panelists.

“We’re searching for mature operations with high yields. We want to be big in Europe,” said Derek Cheung, CEO of Hong Kong real estate investment trust New Century Asset Management Limited.

Speaking during a panel titled “Asia/Pacific and Middle East investment” at the 18th International Hotel Investment Forum, Cheung and fellow panelists said that on their shopping lists are: chiefly sustained value; a fantastic story; and great locations and buildings.

“Typically, we look for upside after we have injected some (capital expenditures),” said Christopher R.J. Knable, COO of Katara Hospitality, a division of Qatar’s sovereign wealth fund.

“Nothing is off limits, but we want assets not easy to replicate,” added Michael Goodson, head of hospitality at fellow Middle Eastern owner Abu Dhabi Investment Authority.

Cheung said due to euro depreciation, he did not regard Europe as any more expensive than it was three years ago.

Total direct investment into Europe in 2014 totaled $18 billion, according to a study by the Baker & McKenzie law firm and Rhodium Group.

That is not to say Chinese investors see no European headwinds. Competition to place capital and government policies are two challenges, but in the scheme of things Europe is the place to be, panelists said.

Europe is capital’s home

“It is certainly more challenging to find clear, obvious buys than it was three years ago. There are a lot more capital flows, and with debt remaining relatively easy, it puts pressure on prices and the long-term investor’s requirement to find properties that can sustain value through the cycle and those to come,” Goodson said, adding he has an eye to see what European quantitative easing (announced in January) might do on asset prices.

“In the United States, (quantitative easing) drove up asset prices, no buts about it, so it probably will be the same in Europe,” he said.

Cheung said markets are difficult to forecast, as “the world is essentially run by government policy.”

“Cycles are different in Asia than in Europe and the United States, so it is the right idea to be in Europe at the moment. It is the way to go. Chinese companies are pushing the envelope and driving the price (in Europe) as funding is very cheap,” Cheung said.

Chinese investors can swing a market, Knable said. He added that the market is overpriced only depending on one’s own risk-aversion tendencies.

“There are plenty of opportunities. Have a strategy, but also have a strategy B, C and D,” he said.

“The best time to get out of the U.S. and Europe was the best time to get into Asia, (but) Asia now is much more risky than the Western world. All cycles are driven by liquidity,” Cheung said.

“Leverage doesn’t change the value of anything, just the price you pay,” Goodson added.

Goodson said he would probably avoid investing in those European markets with supply constraints on them.

Asians on brands

Brands are not the end all, be all of the Asian investors’ worlds, panelists suggested.

Cheung said for him the main consideration is not brand involvement, but cash flow. Knable, on the other hand, said having a brand on board is not always the most important part of the value proposition.

“We’d like to do more hotels that we operate alone, but brands can still bring a lot to the table,” Knable said.

“With online travel agencies here to stay, we need to find a way of working with them, and a lot (of that) has to do with discipline in pricing. Brands have to continue to show that they are worth what they are,” Goodson said.