The European hotel industry is expected to see continued strong transactions volume, even though many markets still have not reached highs seen in the last decade, sources said.

Speakers at the recent International Hotel Investment Forum, including JLL’s CEO hotels and hospitality group for Europe, Middle East and Africa Philip Ward, said the region has been fueld by the emergence of hotels as a major asset class. But, he said, what might confuse some investors is the recently seen blurring of the boundaries as to what constitutes a hotel.

Andreas Scriven, international managing director and manager director of consultancy at Christie & Co., said the key trend in the market is the continued adaptability of the hotel sector.

“It reinvents itself. Its ability to repurpose is very impressive,” he said.

Here are some key takeaways from four quick-fire synopses of distinct industry areas shared at IHIF—including European performance trends; global investment; consolidation and mergers and acquisitions activity; and outbound capital.

Performance trends Robin Rossmann, managing director at STR, parent company of Hotel News Now, said European demand has outpaced supply growth since 2010, but some markets still are not back to previous peaks indexed to 2007.

Europe in 2016 saw a 0.6% rise in occupancy to 70.4% and a 1.5% rise in average daily rate to €111.80 ($119.28), in Euro constant currency.

“2016 was the year luxury hotels struggled,” Rossmann said. But despite a 2.2% decline in occupancy, he said, the luxury segment still was able to grow ADR by 0.4%.

The star segments in regards to ADR for the full year, according to Rossmann, were upper midscale, which saw a rise of 3.3%; and upscale, which saw a rise of 3.2%. Both segments were helped by increases in occupancy of 1.1%.

Driving revenue per available room, he added, was a 12.1% increase in group travel—compared with a 6.6% decline in 2015. At the same time, transient business in 2016 declined by 0.1%, compared with a 10.6% increase in 2015.

“For 2017, a good year (is) expected. … Hot markets include Amsterdam, Barcelona, Dublin and Madrid. … Recovery markets include Brussels, Paris, Moscow and Milan,” Rossmann said.

Global investment James Chappell, global business director at Horwath HTL, said funds are still actively searching for places to park capital, despite much geopolitical and security risk in 2016.

Political ramifications might also upset the market in 2017, he said, with a populism element running through elections in The Netherlands (15 March), France (23 April) and Germany (24 September).

“As far as global transactions were concerned, 2016 was not as good as 2015, but it still was very good, the third strongest on record. And for 2017, markets we did not think would be very strong, such as London, are already having good transactions volumes,” Chappell said.

He noted there is a diversity of sources of capital.

“Banks are still lending. Yes, private equity money is dropping, but there is an increase in fund activity chasing assets, which will have a positive reaction on transactions. … Germany still is rising, the U.K. is stabilizing,” he said, adding that potential barriers in the U.S. regarding EB-5 visas might result in an increase in Chinese activity in Europe.

He said there have been signs that other regions could join the investment fray.

“Oil is more stable, so perhaps there will also be more activity from Gulf Cooperation Council states. Overall, 2017 transaction volume levels, we believe, will be similar to those in 2016,” Chappell said.

Consolidation and M&A activity This year, more hotel development is expected to shift from mature to emerging markets, with deals driven by significant capital from Asia and the Middle East, according to Christie & Co.’s Scriven.

Pressure from industry disruptors will also affect the big picture, Scriven said, with the “transformation in booking behavior requiring major investment” and more in-house innovation to provide tailored experiences differentiated for small- and medium-sized groups.

Rossmann said it’s too early to definitely ascertain how significant the threat is from alternative accommodations.

In the key cities STR monitored, he said, alternative accommodations grew by 60% to 80% in the last year but still only accounted for 3% to 4% of supply in those markets.

Chappell added in his view the “sharing economy is a little bit of (a) red herring,” which has been fueled by the rise in low-cost air carriers and the general increase in the ease and ability to travel.

Scriven said he does not see an end in sight to consolidation.

“Globally, approximately 15% to 16% of hotel rooms remain concentrated to the top three hotel companies, and we see that shifting up a little, to 20%,” he said.

The hotel industry, he said, remains ripe for mergers.

“While the number of big opportunities is reducing, the hotel sector remains fragmented compared to other industries,” Scriven said. “That simply means more M&A opportunities remain.”

Regional and national players might well be the next target for M&A, Scriven said.

Outbound capital JLL’s Ward said that in 2016 global cross-border investment fell from its peak in 2015 “both in volume and as a proportion.” However, he said, the trend for outbound investment continued to do well thanks to new investors entering the fray, especially from China.

“International travel continues to soar to more than 2 billion travelers,” he said.

China remained the largest players, with $9.8 billion of outbound hotel industry capital—far outstripping the $2.1 billion leaving the Middle East, $2 billion leaving the U.S. and $1.1 billion leaving Europe.

The rest of Asia spent $4.6 billion, according to Ward, who added despite that impressive Chinese number, investment from the country was down. Chinese investment was “affected by capital restrictions,” he said, “… but the rest of Asia likely will pick up this fall.”