Hotel real estate market

Market sentiment and trends

In 2019, the number of overnight stays in the city of Hannover and the surrounding area reached a record high of 4.25 million. In subsequent years, Hannover was hit particularly hard by the pandemic restrictions as a trade fair location, which led to a drastic decline in the number of overnight stays from 2020 onwards.

Many companies were unable to utilize their full capacity in 2020 and 2021 due to a lack of demand. However, there has been a clear upward trend since 2022, which continued in 2023.

Figures at pre-corona level from mid-2022

Almost 4.05 million overnight stays were recorded in the city and surrounding area of Hannover in 2023. In the city of Hannover, the number of overnight stays rose by 16% year-on-year to approx. 2.36 million

The reason for the recovery was the final lifting of all coronavirus pandemic restrictions, which were still in place for events, trade fairs and general gatherings in the months of January to April in 2022. As a result, the number of overnight stays in the state capital was actually around 20,000 nights higher than in 2019.

In 2023, just over 4 million overnight stays were recorded in the Hannover Region for the first time since 2019. Although this is still around 5 percent less than in the record year of 2019, with an increase of 0.45 million overnight stays, there were significantly more guests than in 2022 (+12.5 %).

The number of overnight stays in the state capital of Hanover even reached a new high of 2.36 million, a good 20,000 more than in 2019.

Average room rate recovers

The return of business travelers, trade fairs and events, the catching up of many private celebrations and the lifting of pandemic-related restrictions led to a significant increase in occupancy and bookings from mid-2022. This positive trend continued in 2023 with a further slight increase.

The average room occupancy rate in Hanover was around 58% in 2023. The average room rate rose from 95.90 euros to 104.80 euros. As a result, the average revenue per available room (RevPAR) in Hannover improved by 6 euros to 60.90 euros in 2023.

Bed supply is being expanded again

Following the decline in supply capacity during the coronavirus pandemic, a significant increase of around 1,230 hotel beds was recorded in the city of Hanover alone in 2022 compared to the previous year. The number of hotel beds also grew by a further 210 in 2023, reaching almost 10,500 beds. They are spread across a total of 43 hotels.

Hotel establishments in the Hannover Region also offered more beds again in 2023 due to the increase in the number of overnight stays. Overall, the number rose by an annual average of around 800 beds in 2023 compared to the previous year.

Investment market at a standstill for hotels

While there were still hotel transactions at a low level in Hanover in 2022 (€37 million), the investment market stood still in 2023 and the first half of 2024. No transactions were registered in the hotel segment.

The increasing momentum in the market that was expected before the coronavirus pandemic has largely been suspended. Investors are factoring these risk increases into their investment considerations. Market participants' expectations with regard to the prime yield for Hanover were 5.6% in 2023. A further increase of 40 basis points to 6% is forecast for 2024.

Outlook: Economic situation remains tense

The pandemic has been overcome and the number of overnight stays is recovering, especially in tourist travel and through a broader-based conference business and corresponding MICE events(Meetings, Incentives, Conventions and Exhibitions).

Nevertheless, the mood among the players is mixed. The major leading international trade fairs have not yet been able to return to the years before 2020, problems such as a shortage of skilled workers and rising operating costs cannot be solved quickly for the hotel industry and geopolitical uncertainties are dampening the important demand from abroad among business travelers in some cases.

The current market opportunities for new projects are therefore difficult to assess. The hotel projects initiated in Hanover and the surrounding area, which are fully financed and operator-secured, have been pushed ahead during the pandemic. However, the uncertainties caused by rising energy prices, inflation, rising interest rates and the tense situation in the construction industry have led to delays in all projects.

The fundamental attractiveness of Hanover as a hotel location for the real estate industry is underlined by the projects that have been realized in the last five years, as well as those that are planned and in some cases under construction.

Ten hotels with a total of around 1,500 rooms have opened in the city of Hanover since the beginning of 2020. Most recently, the former Loccumer Hof was revitalized and reopened as the June Six Hotel with 114 rooms at the beginning of May 2024.

The PHIL & MAX Hotel (72 rooms) will open in Laatzen near the trade fair in the first half of 2024. Two hotels, which will later be operated by the Premier Inn Group, with a total of almost 400 rooms are under construction and are expected to open in 2025. The announced revitalization of the former Maritim Hotel (285 rooms) is progressing very slowly and is likely to be delayed further.