Paradox or opportunity for Europe’s hotel sector?

The Decisive Eye

March 10, 2023 | 13 min read

Indraneel Karlekar, Ph.D.

Senior Managing Director, Global Head of Research & Portfolio Strategies

Daniel Tomaselli

Manager, Global Research

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Key themes

Europe’s vibrant travel industry saw a rebirth in 2022 as the leisure traveler surged with the effective ending of the COVID-19 pandemic. It was a miraculous recovery after the hotel industry suffered a near-death experience during the pandemic.
The recovery in global growth has pushed inflation to uncomfortably high levels, well above central bank targets, forcing strong monetary tightening to slow down the consumer who remains eager to spend, especially on leisure.
A paradox faces much of the developed world: consumers are willing and eager to spend, but central banks are applying the brakes on credit through higher interest rates to reduce inflation. For hotel investors, this paradox in Europe is creating some intriguing investment opportunities.
A fragmented hotel market, with most assets still being independently owned and operated, is facing the headwinds of higher labor and interest costs while being squeezed by larger chains using modern business models. As a result, fertile opportunities to engage in hotel strategies across Europe have emerged.

Introduction

COVID-19 paralysed global travel, upending one of the key pillars of the modern economy. The pandemic had a deleterious impact on the travel industry, leading to a near collapse in occupancy levels in hotels across the world. Major global destinations fell silent as travel halted with some of the most historic cities in Europe desolate. Investor sentiment plunged along with hotel occupancy and, for 18 months, the leisure industry endured trial by fire. The emergence of effective vaccines paved the way for travel to resume in 2021 and surge in 2022. Nowhere was this more apparent than in Europe, long a global destination for tourism and business travel, where the rebound has been remarkable.

But along with the recovery in travel and revenue, came the challenge of higher inflation, partially enabled by a remarkable fiscal and monetary response to counter the effects of the pandemic. As 2022 progressed, the spectre of inflation emerged as a major concern and the ECB began the process of removing monetary accommodation and increasing interest rates. In a few months, the global dialog shifted from easy money to restrictive policies throwing a shadow on the nascent recovery in Europe and globally. Hotel owners and operators have become a bit more anxious as the threat of slower growth or even recession emerges as an overhang on the generally constructive outlook for travel. However, recent news on Europe has been more encouraging from a demand perspective, though the outlook for the capital markets remains more challenging. This has set up an intriguing environment where hotel occupancy is forecast to remain robust but where owners, particularly those poorly capitalized, will struggle to remain competitive. It is this paradoxical environment where hotel investors can find some interesting opportunities to secure and turn around attractive assets into a growing pool of demand.

A brighter economic outlook

Europe’s outlook has notably improved compared to the last quarter, as the risk of a major energy crisis during the winter months has been averted. In fact, Europe delivered a positive fourth quarter of growth buoyed by unusually warm weather, energy-saving efforts, and liquefied gas imports from new partners. Wholesale energy prices have fallen sharply to levels last seen before the invasion of Ukraine, with positive knock-on effects on inflation expectations, and growth projections. Additionally, three recent developments contributed to uplifting the prospects of the world’s economy; the reopening of China after three years of strict COVID prevention measures; a new mammoth programme of subsidies to stimulate green investment in the U.S.; and a modest slowing in global inflation, which should ease the pressure on central banks to keep tightening monetary policy.

Herein lies the paradox for investors: it is the strength in underlying demand that is keeping inflation levels elevated. A higher inflation outlook will ensure that the European Central Bank (ECB) continues to “pump the brakes” of the economy until core inflation returns under control, a task which is yet to be accomplished. As a result of tightening monetary policy, interest rates in the Eurozone and the UK have increased sharply by 250 and 325 basis points since January 2022, one of the most aggressive hiking cycles in history. Due to a transmission time lag, the full impact on the real economy, particularly consumers and housing, will be felt over the coming months and will likely be a headwind to consumption. Finally, the ECB is expected to gradually start normalising its balance sheet this year, by offloading some of the €5tn bonds accumulated over the last decade. Known as quantitative tightening, the process may strain the credit market and drive-up borrowing costs further imperiling the recovery.

For hotel investors, the improving outlook for the economy needs to be balanced against materially tighter credit conditions, which is likely to exert a drag on growth. This push and pull between growth and tightening credit sets the stage for an interesting landscape into which hotel investors can find opportunities. It is this unique paradox which investors face in the coming months.

EXHIBIT 1: The number of European flights is expected to break above pre-pandemic high in 2024
Number of flights in Europe, annual, million

Graph showing the annual number of flights in Europe from 1990 through 2022, with projections to 2030.

Source: Eurocontrol, April 2022

Though Europe’s economy will be sluggish, its travel industry should boom

This paradox wherein consumer demand for travel is strong, even as central banks do their utmost to cool growth, sets up an interesting investment opportunity for hotel investors. Though we do expect consumers are likely to come under pressure, we don’t foresee travel being impacted, given the unique situation where we find the global travel industry, which has just begin to recover from the near shutdown of two years. In fact, flights in Europe are expected to increase steadily (Exhibit 1, previous page).

When the World Health Organisation declared a public health emergency in March 2020 and restriction measures forced roughly 80% of all hotel establishments on the continent to close their doors, the tourism industry was on its knees. In 2022 when travel began to resume, the summer rebound in the sector took even the most seasoned operators by surprise. Most of the European hotel markets returned to pre- pandemic revenue levels, as measured by RevPAR, the industry benchmark tracking top-line financial performance. This recovery was a remarkable achievement, driven by an increase in the average daily room rates (ADR), which in several markets jumped way ahead of inflation (see Exhibit 2). On the other hand, occupancy still offers significant margins for improvement because some countries—including China which alone contributes to 25 million nights in European accommodations per annum on average—have just started to reopen their international borders. Looking to 2023 and beyond, we anticipate that the ongoing recovery in travel within and to Western Europe will remain robust. From a demand perspective, we believe the hotel investor in Europe faces a strong period of growth.

EXHIBIT 2: Most European hotel markets recovered above pre-pandemic levels, driven by price growth (ADR)
Selected European markets** performance in 2022 over 2019

Graph showing occupancy change percent of select European hotel markets in 2022 over 2019.

1= Rotterdam, 2= Barcelona, 3=Madrid, 4=Warsaw, 5=Bordeaux
* Includes city centre only
** Bubble size indicates the number of rooms in 2022
Source: STR, December 2022

Not all investment opportunities are born equal

While the medium-term outlook for the hospitality industry is promising, the same cannot be said for all businesses operating in the sector. The European hotel industry is idiosyncratic in terms of its ownership, investment levels, cost, and lease structures. The steady increase in interest rates has elevated the cost of debt materially and put pressure on operating margins particularly for smaller, less well-capitalized owners. Moreover, hotel ownership is highly fragmented in Europe which places greater pressure on the balance sheets of small-to-midsize owners and opens the door to experienced investors to take advantage of the promising outlook on travel.

The European hotel market remains highly fragmented

Although hotel chains have gained market share over the last few years across Europe, their presence is not as dominant as in many other regions of the world. The European hotel market remains highly fragmented, with most assets still being independently owned and operated. Many owners have not had the capacity to invest in their premises, particularly in the light of the havoc wrought by the pandemic, which decimated revenue. Moreover, many family-owned hotels do not have modern business models, thus, paving the way for being acquired and optimised through renovations, repositioning, and branding. According to STR, at time of writing, there are roughly 200,000 hotel establishments across the continent—equivalent to roughly six million bedrooms. The independent segment contributes for 77% of all properties and 57% of all rooms, since independent hoteliers are on average smaller in size compared to chains. But when we look at the share of investments, the picture is quite different, with independent hotels lagging with 36% of the total capital spent—a structural disadvantage, mainly caused by lack of funding, scale, and sometimes, specific skills such as marketing and distribution.

EXHIBIT 3: Independent hotels on average suffer from chronic underinvestment
European hotel market share breakdown, %

European hotel market share broken out by share of properties, share of rooms, and share of investments.

Source: STR, December 2022 and Statista, November 2022

Rising costs pose a challenge for many operators

Operators in the hospitality sector survived the COVID-19 pandemic thanks to the contribution of multiple stakeholders. Governments deployed a series of measures to cushion the impact of lockdowns, ranging from financial aid, cash grants, tax reliefs, and furlough schemes. Lenders provided liquidity through covenant waivers and loan guarantee schemes (i.e. moratoriums). Landlords offered to defer rent payments amid fear of tenant’s insolvency and empty premises. But all these extraordinary measures are now ebbing, leaving operators to rely purely on their own resources when coping with the challenges looming on the sector. Although tourism has rebounded, expenditure levels have increased sharply too. The rise of staff wages, input costs, interest rates, and lending premium are likely to put a strain on weaker operators whose balance sheet have not fully recovered from the COVID period. Additionally, mounting competition from large hotel chains is also expected to increase cost pressure, since those players aiming to protect their market share may have to renovate their facilities or implement other capital expenditure programmes.

Rigid operating agreements put strains on hoteliers

Hotel management agreements are the legal bindings governing the relationship between hotel owners and operators. In the U.S., these agreements are primarily structured via franchise or management contracts, whose fees are based on a percentage of revenue or profits. On the contrary, in most parts of Europe, hotels are predominantly operated under a lease contract, which obliges operators to pay a fixed amount regardless of the economic cycle. As such, European operators are more exposed to higher volatility and higher risks. On one hand, they enjoy extra profits in expansionary periods, but on the other, they take on a significant financial burden when vacancy increases, as their share of fixed costs is higher. The same is applicable to the independent hoteliers who own their own premises, an arrangement also widely relevant in Europe.

Fragmented ownership, rising costs, and rigid management agreements are the core reasons why we expect a growing number of owner operators and smaller groups to shift to an asset-light strategy (seeking to dispose their assets and having more liquidity to manage their accounts) and focus on operations rather than the pure real-estate element, opening the door to a large part of the market that traditionally was difficult to penetrate.

Tailored investment strategies to turn around neglected assets

Against this backdrop of an improved outlook for growth and travel, fragmented ownership, rising costs and rigid operating agreements, we believe there is a solid case for investing in the lodging sector. Refurbishing and upgrading well-located old hotels to raise ADRs is perhaps the best-known investment strategy, but certainly not the only one to consider. Our investment thesis pivots around identifying markets and owners in cities with strong leisure components, as our analysis suggests this segment should benefit from favourable structural trends over the upcoming investment cycle (see call-out boxes). Our investment thesis also rests on the ability to source off-market deals and create value for investors by developing the right repositioning plan that best fits each specific asset. It is also important to reposition assets carefully curated in partnership with some of the most innovative hotel brands, each of whom is best in class in a particular segment or niche. Some specialise in creating unique hybrid solutions blending the threshold between accommodation and entertainment. Others bring alive specific lifestyle concepts to intercept and retain a particular customer segment and boost financial performance.

Lifestyle-led repositioning

Besides small details, such as interior décor and style, the hotel model has not evolved much for decades. However, in the last few years, new emerging trends have transformed peoples’ lifestyle and travel expectations, boosting the demand for innovative hotel products, which are offering a unique lifestyle approach to lodging. Such lifestyle-oriented options are scarce across Europe, especially in trendy and vibrant locations, offering many opportunities of repositioning and transforming hotels into sought after assets. These hotel brands are attracting millennials and urban explorers whose preferences are skewed towards experiencing unique cultures and being part of vibrant communities, rather than the size of a bedroom. As such, these buildings integrate smaller but unique hotel rooms together with stylish restaurants, bars, co-working space, and other adaptable areas for special events, including live music, art exhibitions, and conferences. Contrary to traditional hotels, these brands embrace an open- door policy, encourage interactions between its guests and the local community, often becoming a landmark physical destination for its specific target audience, and a digital constant presence in the background of people’s selfies and social media posts.

Technology-led repositioning

Travel has moved up in peoples’ priority list, and what was once perceived as a luxury, has broadened across all tourist types, including those on a budget. Lodging demand is set to become less dependable on the economic cycle as people appear less willing to cut travels and experiences compared to other areas of potential savings. Meanwhile, the use of the internet, smart phones, and apps have made travelling easier and contributed to the boom of alternative accommodation solutions, which are expected to grow by 16% compound annual growth rate (CAGR) over the next seven years globally. We believe this segment has significant addressable potential in Europe as well, and one strategy could consider converting small assets, with between 20 to 50 rooms, into fully digital lodging operators able to marry the comfort of a bed and breakfast experience with technology, convenience, and quality standards. By providing a fully digital guest experience and eliminating the number of staff on site, these hotel types are able to reduce operational costs by 60% compared to standard hotels.

CONCLUSION: Paradoxes often provide investment opportunities

There are times when contradictory information make investment decisions challenging to execute. As John Keynes once remarked, “If the barometer is high, but the clouds are black, it is not always rational that one should prevail over the other in our mind.” Uncertainty is not an investor’s friend. Undoubtedly, there is uncertainty on how the global economy will cope with strong central bank action to tighten monetary conditions. However, COVID-19 was also a unique event that put global travel on hold but also demonstrated its necessity as a part of modern society. While the broader economic environment cannot be detached from consumers, the future of travel in Europe is likely to benefit from the very unique nature of the pandemic that is unleashing pent-up demand.

Traveling has snapped back and resumed its long-term growth trajectory underpinned by global travel, rising middle class in developing countries, and mounting desire to devote more time for leisure activities and memorable experiences. Our analysis shows a large number of independent hoteliers across the continent may not be in a position to benefit from this positive outlook, as a prolonged period of underinvestment has put these operators into a structural disadvantage against larger hotel chains with deeper pockets and modern management. Higher inflation is putting pressure on wages and lending costs and has started to strain balance sheets, forcing a growing number of small owners and independent operators to seek recapitalization or asset sales over the coming months. We believe this could open the door to a significant portion of the market that has historically been difficult to penetrate and create an investment strategy that can take advantage of a fundamental tenet of society that COVID-19 served as a timely reminder for.

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We may disclose your personal information to other related companies within the Principal Financial Group®, agents and other external service providers (who supply administrative, financial or other services), some of which are located overseas. Where this occurs, we take steps to protect personal information against misuse or loss however you should be aware that in the event the overseas recipient fails to handle the personal information consistently with the Australian Privacy Principles, we will not be accountable under the Privacy Act and you will not be able to seek redress under the Act. The countries this information may be disclosed to will vary from time to time, but may include Brazil, Chile, China, Hong Kong, India, Japan, Malaysia, Singapore, the United Kingdom and the United States and other countries where the Principal Financial Group® has a presence. A list of locations in which the Principal Financial Group® operates can be found at https://www.principal.com/about-us/our-company/company-overview/worldwide-locations. Our Privacy Policy contains information about how you can gain access to the personal information that we hold about you and seek correction of that information, subject to certain exemptions under law. Our Privacy Policy also contains information about how you may raise concerns regarding privacy with us and how we will deal with your concerns.

You can obtain a copy of our Privacy Policy by clicking on the link below:

Privacy at Principal Global Investors (Australia) Limited

By clicking "Accept", you consent to us dealing with your personal information in the manner set out in our Privacy Policy. You also acknowledge and understand that by providing such consent that we will not be required to take such steps as are reasonable in the circumstances to ensure overseas recipients of your personal information comply with the Australian Privacy Principles.

"Principal Financial Group is a global organization that operates in many different jurisdictions worldwide. Principal Financial Group’s diversified group of companies and affiliates provide comprehensive asset management solutions for institutional investors, investment funds and individuals in key markets around the world. Principal Financial Group has investment offices in the United States, [Mexico, South America, Europe, the Middle East, and throughout Asia]. Where appropriate, Principal Financial Group entities are registered with appropriate regulatory authorities in the jurisdictions in which they are required to be registered to carry on their respective business activities.

All products or services provided to you by any Principal Financial Group company shall only be available in the jurisdiction(s) within which the company providing the product or service is authorized to operate. The relevant Principal Financial Group company reserves the right to make the final determination on whether or not you are eligible for any particular product or service. If you choose to enter a website outside your country of residence, you are advised that it may not be legal in that jurisdiction for you to access or use the facilities available on that Site and the legal requirements of that jurisdiction may prohibit you from dealing or otherwise transacting in that jurisdiction.

Principal Financial Group makes no representation that the content of the site is appropriate for use in all locations, or that the transactions, securities, products, instruments or services discussed at this site are available or appropriate for sale or use in all jurisdictions or countries, or by all persons and entities. Nothing on this website shall be considered a solicitation for the offering of any investment product or service to any person in any jurisdiction where such solicitation or offering may not lawfully be made.

You may view, download for caching purposes only, and print content from the website for your own personal use, subject to the restrictions set out below and elsewhere in these Terms of Use.

No Guarantee of Timeliness
This website may contain videos where the comments were valid on the date the video was recorded. Markets move continuously and you should only rely on current information for any investment decisions. The information and materials contained on this website, and the terms, conditions, and descriptions that appear, are subject to change. All content on this website is presented only as of the date published or indicated, and may be superseded by subsequent market events or for other reasons. In addition, you are responsible for setting the cache settings on your browser to ensure you are receiving the most recent data.

No Warranties
The information on this website has been developed internally and/or obtained from sources believed to be reliable; however Principal Global Investors and its affiliates do not independently verify or guarantee its accuracy or validity. The information and services provided on this website are provided ""AS IS"" and without warranties of any kind, either expressed or implied. To the fullest extent permissible pursuant to applicable law, Principal Global Investors disclaims all warranties, including, but not limited to, any warranty of non-infringement of third-party rights and any implied warranties of merchantability and fitness for a particular purpose. Principal Global Investors does not warrant, either expressly or impliedly, the accuracy or completeness of the information, text, graphics, links or other items contained on this website and does not warrant that the functions contained in this website will be uninterrupted or error-free, that defects will be corrected, or that the website will be free of viruses or other harmful components. Principal Global Investors expressly disclaims all liability for errors and omissions in the materials on this website and for the use or interpretation by others of information contained on the website. Subject to any contrary provisions of applicable law, no company in the Principal Financial Group nor any of their employees or directors gives any warranty of reliability or accuracy nor accepts any responsibility arising in any other way (including by reason of negligence) for errors or omissions on this website.

If you have questions, please email us.

Click ""Accept"" to indicate your acknowledgement and acceptance of Principal Global Investors Terms of Use and to continue."

"These Terms & Conditions explain certain legal and regulatory conditions and restrictions in relation to the Principal Global Investors (Europe) Limited website, and in relation to the Principal Global Investors Funds (‘the Funds’). This information may be changed by Principal Global Investors at any time without notice.

In these terms and conditions, references to 'Principal Global Investors' means Principal Global Investors (Europe) Limited or any affiliate of the Principal Financial Group, Inc. or Principal Global Investors, LLC.

Before you proceed, you must acknowledge that you have read, and agree to, our terms and conditions.

Information in relation to the Principal Global Investors Funds is available through this web site to institutional investors resident in the following countries of: Belgium, France, Finland, Germany, Guernsey, Ireland, Italy, Jersey, Netherlands, Spain, Sweden, Switzerland and the United Kingdom. By proceeding this far you are representing and warranting that you are an institutional investor resident in one of these countries. Not all of the Funds are available in all these jurisdictions, and investors are directed to the Country Registration document for detailed information. What follows is not an offer or invitation to acquire an investment to, and should therefore not be relied upon by, any person anywhere other than the countries noted. Persons in respect of whom such prohibitions apply must not access this web site. This web site is reserved exclusively for non-U.S. persons and should not be accessed by any person in the United States.

Yes, I certify to be an institutional investor and resident of a country listed above.

Cookies
Use of cookies on this site is outlined in the Privacy and Security Policy. In accepting these terms and conditions, you accept the terms of the Cookie Policy and the use of cookies from this site.

Legal Entity Disclosure and Regulation
In Europe by Principal Global Investors (Ireland) Limited, 70 Sir John Rogerson’s Quay, Dublin 2, D02 R296, Ireland. Principal Global Investors (Ireland) Limited is regulated by the Central Bank of Ireland.

In the United Kingdom by Principal Global Investors (Europe) Limited, Level 1, 1 Wood Street, London, EC2V 7 JB, registered in England, No. 03819986, which is authorised and regulated by the Financial Conduct Authority (“FCA”).

In Switzerland by Principal Global Investors (Switzerland) GmbH. This website is considered as advertising and information contained herewith be treated as such. Investors can obtain free of charge the prospectus, trust deed, the prospectus, the key investor information document (KIID), and the annual and semi-annual reports from the representative in Switzerland.

In Europe and United Kingdom, this website is directed exclusively at Professional Clients and Eligible Counterparties and should not be relied upon by Retail Clients (all as defined by the MiFID and FCA respectively). If you are viewing the material as a retail investor, you should seek independent investment advice before deciding whether the products and services in question are suitable to meet your investment needs and objectives, as the language has not been complied to a retail client standard.

Principal Global Investors Funds
Principal Global Investors (Ireland) Limited is the issuer of the Funds. Investments may only be made on an application form attached to a current prospectus and following receipt by the investor of the KIID in respect of the Fund in which they intend to invest. The latest version of the prospectus of the Funds is dated 14 December 2012.

For Real estate investors in the European Economic Area (“EEA”), this website and the information on it is only directed at persons who are professional investors for the purposes of the Alternative Investment Fund Managers Directive (2011/61/EU) (“AIFMD”), professional clients or eligible counterparties for the purposes of the Markets in Financial Instruments Directive (Directive 2014/65/EU) (“MiFID II”) or as otherwise defined under applicable local law and regulation and at whom this website and the information on it may lawfully be directed in any relevant jurisdiction (“Eligible Persons”). In relation to each member state of the EEA (“Member State”) which has implemented AIFMD (and for which transitional arrangements are not/ no longer available), this website may only be accessed and interests in Funds may only be offered or placed in a Member State to the extent that: (i) the relevant Fund is permitted to be marketed to professional investors in the relevant Member State in accordance with AIFMD (as implemented into the local law/regulation of the relevant Member State); or (ii) this website and its information may otherwise be lawfully distributed and the interests in Funds may otherwise be lawfully offered or placed in that Member State (including at the initiative of the investor). In relation to each Member State of the EEA which, at the date of accessing this website, has not implemented AIFMD, this information may only be distributed and interests in Funds may only be offered or placed to the extent that this information may be lawfully distributed and the interests in Funds may lawfully be offered or placed in that Member State (including at the initiative of the investor).

Persons who are not Eligible Persons, including but not limited to those individuals or other persons who fall within the FCA’s definition of ‘retail clients’, should not use or rely upon this website or the information contained therein and may not engage the services of Principal Real Estate or any of its affiliates, or invest in any Fund. Potential investors are advised that all or most of the protections provided by the UK regulatory system will not apply and that the UK Financial Services Compensation Scheme may not be available in relation to an investment in a Fund or separate account.

The contents of this website have not been verified or approved by any competent regulatory or supervisory authority. No liability, whether in negligence or otherwise, arising directly or indirectly from the use of the information or any part of it on this website is accepted and no representation, warranty or undertaking, whether express or implied, is or will be made at any time by Principal Real Estate or its affiliates or any of their respective advisers, directors, officers, employees, representatives or other agents (“Principal Agents”) for any information or any of the opinions contained herein or for any errors, omissions or misstatements.

None of Principal Real Estate or its affiliates or any Principal Agents makes or has been authorised to make any representation or warranties, whether express or implied, in relation to Principal Real Estate or regarding the truth, accuracy or completeness of any of the information contained on this website at any time. No representation or warranty is given by Principal Real Estate, its affiliates or the Principal Agents as to the achievement or reasonableness of, and no reliance should be placed on any projections, targets, estimates or forecasts contained in the information on this website. Furthermore, nothing contained on this website is or should be relied on as a promise or representation as to the future. No reliance may be placed by any person for any purpose whatsoever on the information or opinions contained on this website or on its completeness, accuracy or fairness at any time.

Principal Global Investors (Europe) Limited is not authorised by the FCA to directly deal with retail investors; any distribution of the Fund to retail investors in Europe is facilitated by fund distributors with which Principal Global Investors (Europe) Limited has entered distribution arrangements, pursuant to advice provided to investors by those distributors, based on the documents Principal Global Investors (Europe) Limited provides. Retail investors should not be provided with access to this website.

The name of the Swiss representative is ACOLIN Fund Services AG, Stadelhoferstrasse 18, CH-8001 Zürich. The name of the Swiss paying agent is Banque Cantonale de Genève, 17, quai de l’Ile, 1204 Geneva. Investors can obtain the prospectus, trust deed, the simplified prospectuses and the annual and semi-annual reports free of charge from the representative in Switzerland.
The value of units and the income from them may fall as well as rise.

Investments in the Funds are neither insured nor guaranteed by the US Government or the Federal Deposit Insurance Corporation and are not deposits or obligations of, or guaranteed by, Principal Global Investors.

No Solicitation
Nothing contained in this website shall constitute an offer or solicitation, in relation to units in the Funds or generally, in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or not authorised.

In particular, shares issued by the Company, and units in the Funds, have not been and will not be registered under the United States Securities Act of 1933 as amended or the securities laws of any state or political subdivision of the United States and may not, except in a transaction which does not violate US securities laws, be directly offered or sold in the United States or to any US Person. The Company will not be registered under the United States Investment Company Act of 1940 as amended.

This website is reserved exclusively for non-US persons and should not be accessed by any person in the United States.

No Investment Advice
The information in this website contains general information only on investment matters and should not be considered as a comprehensive statement on any matter and should not be relied upon as such nor should it be construed as specific investment advice, an opinion or recommendation. The general information it contains does not take account of any investor’s investment objectives, particular needs or financial situation, nor should it be relied upon in any way as a forecast or guarantee of future events regarding a particular investment or the markets in general. Past performance is not a reliable indicator of future performance and should not be relied upon as a significant basis for an investment decision.

You should also inform yourself as to (a) the possible tax consequences, (b) the legal requirements and (c) any foreign exchange restrictions or exchange control requirements which you might encounter under the laws of the countries of your citizenship, residence or domicile and which might be relevant to any investment, including the subscription, holding, transfer or disposal of units in the Funds

Delegation of Investment Management to Affiliates

Products upon which composite results contained in this material, if any, are based may not themselves be available in the United Kingdom and certain other jurisdictions; however, the underlying investment management capability can be made available to institutional investors subject to all applicable local regulations and restrictions. In connection with its management of client portfolios, PGIE may delegate management authority to affiliates that are not authorised and regulated by the Financial Conduct Authority. In any such case, the client may not benefit from all protections afforded by rules and regulations enacted under the Financial Services and Markets Act 2000.

Disclaimer
The information on this website is given by Principal Global Investors in good faith and has been derived from sources believed to be reliable and accurate as at their date. However, Principal Global Investors makes no representation or warranty of any kind for the accuracy or completeness of the information and it is under no obligation to update or correct any errors in the information after the date of publication. This website also contains videos where the comments were valid on the date the video was recorded. Markets move continuously and you should only rely on current information for any investment decisions.

Subject to applicable law, Principal Global Investors and its affiliates and their respective directors, employees and associates do not accept any responsibility arising in any way (including by reason of negligence) for errors in, or omissions from, the information and do not accept any liability for any loss or damage, however caused, as a result of any person relying on any information on the website or being unable to access the website.

The Internet is not a totally reliable and secure medium of communication. Principal Global Investors accepts no liability for the security or confidentiality of information transmitted in this way and any such transmission of information shall be at your own risk.

The entire content of this website is subject to copyright with all rights reserved. You may not copy, reproduce, distribute or modify the content of this website without the prior written permission of Principal Global Investors.

No instructions for investment purposes will be accepted directly from this website or by e-mail.

If you accept these terms and conditions, click “Accept.”

You are about to leave PrincipalAM.com and be directed to our Japanese site, PrincipalGlobal.jp. If you wish to proceed, please click "Accept." If you would like to stay on PrincipalAM.com, please click "I do not accept."

You may view, download for caching purposes only, and print content from the website for your own personal use, subject to the restrictions set out below and elsewhere in these Terms of Use.

No Guarantee of Timeliness
This website may contain videos where the comments were valid on the date the video was recorded. Markets move continuously and you should only rely on current information for any investment decisions. The information and materials contained on this website, and the terms, conditions, and descriptions that appear, are subject to change. All content on this website is presented only as of the date published or indicated, and may be superseded by subsequent market events or for other reasons. In addition, you are responsible for setting the cache settings on your browser to ensure you are receiving the most recent data.

No Warranties
The information on this website has been developed internally and/or obtained from sources believed to be reliable; however Principal Global Investors and its affiliates do not independently verify or guarantee its accuracy or validity. The information and services provided on this website are provided ""AS IS"" and without warranties of any kind, either expressed or implied. To the fullest extent permissible pursuant to applicable law, Principal Global Investors disclaims all warranties, including, but not limited to, any warranty of non-infringement of third-party rights and any implied warranties of merchantability and fitness for a particular purpose. Principal Global Investors does not warrant, either expressly or impliedly, the accuracy or completeness of the information, text, graphics, links or other items contained on this website and does not warrant that the functions contained in this website will be uninterrupted or error-free, that defects will be corrected, or that the website will be free of viruses or other harmful components. Principal Global Investors expressly disclaims all liability for errors and omissions in the materials on this website and for the use or interpretation by others of information contained on the website. Subject to any contrary provisions of applicable law, no company in the Principal Financial Group nor any of their employees or directors gives any warranty of reliability or accuracy nor accepts any responsibility arising in any other way (including by reason of negligence) for errors or omissions on this website.

If you have questions, please email us.

Click ""Accept"" to indicate your acknowledgement and acceptance of Principal Global Investors Terms of Use and to continue."

This website contains general information only on investment matters and nothing in this website is intended to constitute or form part of any offer or inducement to issue or sell, or any solicitation of any offer to subscribe for or purchase, any securities or investment products in the UAE (including the Dubai International Financial Centre) and accordingly should not be construed as such. Information in this website is not directed at you if we are prohibited by any law of any jurisdiction from making the information on this site available to you and is not intended for any use that would be contrary to local law or regulation. Products or services mentioned on this site are subject to legal and regulatory requirements in applicable jurisdictions and may not be available in all jurisdictions. Accordingly, persons are required to inform themselves of and observe any such restrictions.

The information in this website is being made available on the basis that the recipient acknowledges and understands that the entities and securities to which it may relate have not been approved, licensed by or registered with the UAE Central Bank, the Dubai Financial Services Authority or any other relevant licensing authority or governmental agency in the UAE or elsewhere in the Middle East.

The information in the following website should not be construed as investment advice or a recommendation for the purchase or sale of any security. The value of investments and the income from them may fall as well as rise. Principal Investor Management (DIFC) Limited and the other member firms of Principal (collectively, the “Firms”) do not guarantee any investment results and there can be no assurance that the strategies employed will improve investment performance, and make no guarantee that a client’s investment objectives will be achieved and no warranties or representations, expressed or implied, are made by the Firms concerning the benefits of these strategies discussed herein. The information in this website has been developed internally and/or obtained from sources that the Firms believe to be reliable; however, the Firms do not guarantee the accuracy, adequacy or completeness of such information and are not responsible for any errors or omissions. This website also contains videos where the comments were valid on the date the video was recorded. Markets move continuously and you should only rely on current information for any investment decisions.

This website contains general information only on investment matters and should not be considered as a comprehensive statement on any matter and should not be relied upon as such. The information it contains does not take account of any investor’s investment objectives, particular needs or financial situation. Past performance is not a reliable indicator of future performance and should not be relied upon as a significant basis for an investment decision. You should consider whether an investment fits your investment objectives, particular needs and financial situation before making any investment decision.

Nothing in this website should be construed as investment, tax, legal or other advice.

The content of this website has not been approved by or filed with the UAE Central Bank or Dubai Financial Services Authority.

Access to this website is only permitted for “Professional Clients” as defined in the Conduct of Business of the Dubai Financial Services Authority’s Rulebook. If you are not a “Professional Client”, you may not access this website and you should select the “Decline” link below.

By selecting the “Accept” button below, and entering this website, you agree to these terms and confirm and represent that you are a “Professional Client”.