Southern Europe has been stealing the hospitality headlines for leading the leisure bounce back and achieving strong year-round occupancy over the past 18 months. But as the post-pandemic landscape matures, key pockets of Northern Europe are convincing hospitality investors to explore more diverse geographies, which offer alternative characteristics but equally long-term stability.
One such area is the Nordics, where hospitality transactions have been steadily gaining pace. CBRE data shows that Nordic hotel investment grew 14 per cent year-on-year to €230 million in the first four months of 2024. The largest hotel transaction during the period was Nrep’s acquisition of the 260-key Comfort Hotel Karl Johan in Oslo from CBRE IM. Other key deals during the first half of 2024 included Balder’s purchase of the Hotel Karlatornet, and Sinoma Fastighets AB’s acquisition of the property housing First Hotel G from Deka, both in Gothenburg, Sweden.
While the Nordic hotel market has largely been a focus of domestic or pan-Nordic capital to date, that is now starting to change as international investors who have successfully traded other asset classes in the region explore hospitality too. Political stability, high per capita GDP and social equality have added to the appeal of this transparent market.
More recently, fluctuations in the exchange rates of local currencies are also drawing in euro, pound and dollar investors, suggests Stefan Giesemann, JLL’s managing director for hotels & hospitality capital markets, DACH, Central, Northern and Eastern Europe. “Local currencies such as the Swedish krona have weakened in comparison to both the British pound and the euro, opening the market to more international capital,” he notes, adding that cross-border investors are also taking advantage of the positive impact of currency forwards when investing in Swedish or Danish hotels. “By hedging foreign exchange risk and managing exposure they’re protecting themselves against future potential currency fluctuations,” Giesemann says.
Tech-driven solutions
CBRE research suggests that most of the available capital is targeting value-add opportunities, while the appetite for core investments in hospitality remains limited. However, the region’s reputation for tech-forward solutions – plus a Europe-leading take on environmental, social and governance (ESG) matters – suggest that investors in the region will deliver dynamic and innovative solutions to the market as they transform the Nordic’s older stock.
Tech-driven hospitality provider, Bob W., was founded in Finland and offers an alternative to hotels and short-stay apartments through its ‘tech-powered’ serviced apartment model. Active in Finland, Estonia, the UK and Spain, the company quickly attracted over €70 million in funding from the likes of Nrep, Evli Growth Partners and Tesi after its launch in 2018, and today operates 36 “sustainably operated, design led, full service” aparthotels across 17 European cities. Earlier this year, the firm announced it was adding two more properties in Finland. As well as Helsinki property Bob W Kaarti, the business will launch Bob W Kamppi also in the Finnish capital, and Bob W Turku City Centre, the brand’s first property in the historic southwest coastal city, with the two together adding over 100 keys to the portfolio.
Niko Karstikko, co-founder and CEO of Bob W, says: “As a Finnish pan-European hospitality brand, I am thrilled that Bob W is supporting its heritage by opening more world class properties in Finland. The Finnish market is a rapidly evolving travel destination that is not only popular for guests looking for tranquillity and adventure but is a thriving hotspot for the hospitality industry.”
Another tech-forward, locally-grown operator is Hiisi Homes & Hotels, which operates fully-furnished smart hotels and serviced apartments in local neighbourhoods across Finland. The brand plans to expand abroad in the coming years, through its proprietary technology developed on APIs from property management platform Apaleo. Another tech-backed, fast growing hospitality provider, Berlin-headquartered Numa, is also pursuing growth in the Nordics. “The Nordics have a lot of the characteristics that suit our product,” says Fredrik Berlin, Numa Group's director. “We see significant demand for long-term, mid-term and short stays as well. We are mostly looking at the capital cities in the region, giving a slight priority to Copenhagen and Stockholm.”
Launch of new chains
Local investors and operators are still perhaps best placed to steal a march on the competition. Earlier this year, Nordic private equity real estate firm Slättö announced it was partnering with Petter Stordalen's Strawberry to launch a new hotel chain aimed at filling a gap in the Nordic hotel market, namely roadside hotels or motels for people travelling by car. Dubbed Stopover, the first of around 20 hotels under the new flag will open in the second quarter of 2025 in the Swedish city of Falkenberg. “The last time anyone had an original thought about roadside hotels, Henry Ford was alive,” quips Stordalen. “In other words, it's been 77 years since he and innovation in roadside hotels fell asleep. Since then, society has fundamentally changed, but one of the things that remains the same then as now, and has been reinforced, is the need to be able to move.” Despite this retro sentiment, Stordalen underlines that Stopover will focus on the future by serving electric vehicle users, business travellers and families – and their pets. It is, he says, “a chain built for a new era, new infrastructure, new technology, and new demands from people who travel by car”. His vision includes supporting not only tourists and travellers but also “those who need temporary housing during a transitional period”.
The first, 151-room hotel in Falkenberg will be equipped with electric vehicle charging, a gym, playroom, laundry room, meeting room/phone booths, dog park, and food and beverage options built as wooden modules in Värmland and then assembled at the hotel site. According to Stordalen, the ambitions for the environment are great, meaning the buildings will run on renewable energy production thanks to solar panels and geothermal heating, and use digital solutions to be resource-efficient “both for people's time and for the climate”.
“Our goal is for Stopover to become a common sight along the Nordic roads and fill a void in the Nordic hotel market, where domestic travel and travel within the Nordic region have increased significantly in recent years,” adds Erik Möller, head of hotels at Slättö.
Transparent appeal
All in all, the region’s reputation for smart and green buildings – as well as tech-savvy operations and fresh thinking – is proving good for business. Giesemann adds: “The Nordic region had a different approach to the pandemic and saw a quicker hospitality rebound. We’ve seen a corresponding resurgence of business travel fuelled by rising numbers of exhibitions and conferences.”
Overall, demand and supply ratios favour further development. “This shortage of available rooms represents opportunities for institutional investors and listed companies looking to restructure portfolios, reduce debt, free up cash and decrease risk,” he adds. “As a result, we’re seeing hotels activity and deals in the region begin to rise.”