The Nordic hotel investment market is typically characterized by a strong local currency and domestic or pan-Nordic capital transactions, which limits competition and makes access difficult for foreign investors.
But that’s all starting to change.
While established domestic investors such as Pandox, Balder or NREP have dominated the market in the past, a broader spectrum of European players – from family offices to private equity funds to institutional core-plus investors – are now entering the Nordic hotel market for the first time.
High living standards, social equality and political stability make the Nordic countries attractive to companies and investors. But recently weaker currencies have become another attractive factor, says Stefan Giesemann, Managing Director for Hotels & Hospitality Capital Markets at JLL in the DACH region and in Central, Northern and Eastern Europe.
“Local currencies such as the Swedish krona have lost value against the British pound and the euro, opening the market to more international capital,” he says.
Cross-border investors, especially from the UK and the US, who want to diversify their portfolios and generate liquidity also benefit from the positive effects of forward exchange contracts when investing in Swedish or Danish hotels.
“By hedging exchange rate risk and managing exposure, they protect themselves against possible future currency fluctuations,” adds Giesemann.
Changing tourism patterns are helping Northern Europe gain market share over traditional destinations. Favorable exchange rates, the emerging Nordic food scene, stunning natural landscapes and more flight options are attracting more travelers looking to explore the region.
The trend towards so-called “cool-cations” – visitors who prefer more temperate climates – has also led to a significant increase in international overnight stays, according to a report by the European Travel Commission. The report highlights year-to-date increases for Denmark (+38%), Norway (+18%) and Sweden (+9%) compared to 2019.
The result is an increasing demand for housing.
“Compared to other European cities, we see a significantly higher supply and demand ratio,” says Giesemann. “This lack of available rooms presents an opportunity for institutional investors and listed companies looking to restructure their portfolios, reduce debt, free up cash and reduce risk. As a result, we are seeing hotel activity and deals start to increase in the region.”
The Nordic hotel and restaurant sector has benefited from geopolitical shifts in favour of countries that are considered particularly safe, have a reputation for quality and service and have a strong focus on sustainability.
“Denmark in particular is becoming increasingly popular with investors as it is an easy location to do business thanks to low bureaucracy, efficient government procedures and a supportive regulatory framework,” says Giesemann.
And as the commercial office market continues to give investors food for thought, office-to-hotel conversion becomes an attractive option for those looking to reposition their real estate portfolio.
Giesemann points out that some established hotel operators have already bought up vacant office buildings and converted them into hotels in sought-after locations.
