European hotel investment has dropped 16 percent year over year due to debt scarcity and economic uncertainty, according to a new report from HVS London. The first eight months of 2012 saw hotel investment activity in Europe total around $4.2 billion (USD). Investment in both single assets and hotel portfolios during 2012 has been significantly down compared with 2011 levels as difficult trading and a severe lack of quality hotel stock has deterred investors. Forty-six hotels (around 9,500 rooms) have been sold this year, 28 percent below the same period in 2011 when 59 qualifying transactions took place.

The sale of hotel development sites in London, however, has boosted what is otherwise a depressed hotel investment market, HVS notes. The city has experienced 46 percent of overall single-asset investment volume in Europe. Investment in Germany also remains strong, accounting for 15 percent of total transaction volume. Meanwhile, France represents 11 percent.

“Until debt becomes more readily available and trading significantly improves, it is difficult to estimate when the hotel investment market will improve but we hope to see transaction figures rising during 2013,” says Tim Smith, director, HVS London.