OREANDA-NEWS. Fitch Ratings says in a new report that cautiously improving business trends, focused hotel ownership property strategies and the possible emergence of hotel REITs will be the main drivers of the sector in 2016. These are the main conclusions from our recent investor meetings held in London and Paris.

Strong and stable occupancy has allowed major EMEA hotel groups to raise average room rates well above underlying inflation in 2015, resulting in improved EBITDA and EBITDA margins during the year. However, Fitch expects 2016 to be tougher, with only moderate price rises as some European countries implement further austerity measures and structural reforms, which could lead to dampened consumer spending.

EMEA hotel groups have embraced the asset-light concept now prevalent throughout North America, but Fitch expects these to maintain a more diversified approach to ownership and operations. We believe European hotels, such as AccorHotels, will continue to hold material owned hotel portfolios as these give some financial flexibility and liquidity through unencumbered asset availability in case of need.

We also think that the creation of a European hotel REIT is now a feasible proposition in the next two years. From a structural point of view, the European office and retail REIT investment property sector is now well established and benefits from good liquidity. The European hotel market is also benefiting from historically low interest rates and a cyclical upturn. European hotels also have investment advantages in terms of attractive yield premiums compared to retail and office, even in prime locations, whose returns are currently low by historical standards.