Global Market Perspective – First Quarter 2014 Printer Print
Worldwide > GMP > Global Market Perspective – First Quarter 2014
 

Hotel Markets

Hotel investment on the rise

2013 proved to be an extraordinarily strong year for hotel investment, with transaction volumes increasing 40% year-on-year to total US$46.7 billion, marking a five-year high. Deal volumes for the year exceeded expectations, driven by steady hotel operating performance, increased debt market activity and investors’ quest for yield.

Hotel Investment Volumes, 2012-2013

US$ billions 2012 2013 % Change 2012-2013 Q4 2012 Q4 2013 % Change Q4 12- Q4 13
Americas 18.3 24.0 31% 7.1 7.2 2%
EMEA 11.2 13.2 17% 4.4 2.8 -35%
Asia Pacific 3.7 9.5 157% 1.3 3.3 152%
TOTAL 33.2 46.7 40% 12.7 13.3 5%

Figures include hotel property transactions of US$5 million and above and exclude note sales, land sales,
foreclosures and recapitalisations.
Source: Jones Lang LaSalle, January 2014

Deal volumes to hit US$50 billion in 2014

In 2014 we anticipate that global deal volumes will hit the US$50 billion mark, representing an 8-10% increase on 2013. The further uplift in transactional activity will be supported by a combination of factors including strong hotel operating fundamentals, improving debt financing for hotels in mature markets, growing interest in assets located in secondary markets, more deals in the select service and budget sectors, and increasing cross-border activity.

Regional Investment Volumes, 2012-2014

Regional Investment Volumes, 2012-2014  

Click here to enlarge

Private equity continues to dominate the market

Private equity investors continue to dominate hotel acquisitions, particularly in the U.S. and Europe, accounting for one-third of investment in 2013. Hotel operators, REITs and Middle Eastern Sovereign Wealth Funds were also very acquisitive. Hotel operators used their balance sheets for selective buys, encouraged by opportunities to acquire single assets in key markets as well as attractive portfolio plays. REITs maintained their strong interest in core markets where the investments are accretive to their share prices; however, they are increasingly seeking opportunities to diversify their portfolios, particularly in the U.S. and some markets across Europe. Sovereign Wealth Funds from Qatar and Abu Dhabi kept their focus on trophy opportunities, but are gradually starting to look outside of gateway markets.

Private equity firms were also the most active players on the sell-side as their hold periods are shorter than those of more traditional investors. Hotel operators were the second most active sellers in 2013, selectively disposing of their non-core assets. Developers and property companies accounted for 15% of all transactions in 2013, selling some of their properties in pursuit of additional capital to repay their loans and finance new projects.

Extraordinary momentum in Americas

The Americas experienced a particularly strong year with investment volumes up 30% year-on-year, representing a five-year high. Leverage continues to flow back into the U.S. capital markets and this, along with active private equity funds and REITs, are the primary drivers of the significant uptick.

Investment activity in the U.S. had a greater geographical and asset type spread in 2013, with markets such as Atlanta, Houston and New Orleans joining the top ranks of deal flow. As a result, the share of investment volume in secondary markets doubled in 2013.

Canada was the second most liquid market in the Americas in 2013 with transaction volumes having nearly tripling to US$1.5 billion. Activity was boosted by the sale of a number of single, large full-service hotels in major cities where pension funds and institutional investors sought to dispose of high-value assets.

Traditionally a market dominated by local investors, the hotel real estate market in Mexico is increasingly attracting foreign buyers, notably from Spain and the U.S. Although sales volumes remained muted with only US$0.5 million in transactions closed in 2013, liquidity is expected to be boosted further by the formation of several new investment vehicles focusing on the hotel sector, including the first two Mexican hotel-focused REITs – FIBRA Hotelera Mexicana and Fibra Inn.

Further improving operating fundamentals in most markets across the Americas, an abundance of equity capital and a strong and growing debt market will create an attractive environment for acquisitions and financings throughout 2014. JLL forecasts a 15% rise in transaction volumes across the Americas for the year. This would mark the third highest level of transactions on record, following 2007 and 2006.

A successful year and positive outlook for EMEA

2013 was a resurgent year for the hotel investment market in EMEA, with transaction volumes up 17%. Together, the U.K. and France accounted for more than half of the deals and attracted three-quarters of all the cross-border investments into the region. Activity in these two core markets is being boosted by their familiarity, maturity and good economic and hotel trading fundamentals.

Middle Eastern capital continued to focus on trophy assets in Europe’s key markets, such as Paris and London, investing US$2.8 billion in European hotels in 2013, a sum that represents half of all cross-border transactions in the region completed in the year.

Despite the continued economic challenges across Europe, we are forecasting hotel investment volume to grow by more than 20% in 2014, to approximately US$16 billion. The increase will be bolstered by a continued sell-down of over-leveraged assets in the control of the lenders, as well as a number of private equity funds reaching the end of their life cycle. We also expect brands to continue their ‘asset light / asset right’ strategy, which could lead to more asset disposals that take advantage of strong investor sentiment.

We anticipate that more U.S.-based private equity funds and other investors will look towards Europe, focusing primarily on core markets and institutional or opportunistic assets. Asian capital is also keen to tap into this region, and in the last 12 months Chinese investors have completed a number of deals. We expect this trend to continue as the number of outbound travellers from China swells.

A landmark year in Asia Pacific

2013 represented a landmark year for the Asia Pacific hotel market, with investment volumes more than doubling to US$9.5 billion. Activity predominantly took place in four key markets - Japan (28%), Singapore (23%), Australia (20%) and China (12%), with all four markets recording the highest annual volumes in the post-crisis era.

Japan topped the Asia Pacific investment charts in 2013 with Tokyo taking the lion's share of activity, as confidence flourished in line with policy changes in the era of 'Abenomics' policies.

South East Asia has been a hotbed for transaction activity, largely driven by unprecedented deal flow in Singapore and renewed investor interest in resorts. Bali, The Maldives, Mauritius, Malaysia, Thailand and Vietnam all recorded resort deals in line with improving connectivity across the region and burgeoning outbound travel from China and India.

China's hotel market has experienced a general slowdown, following the crackdown on conspicuous consumption which was announced earlier in 2013. However, despite the moderating pace, China still witnessed a 68% surge in hotel market liquidity during the year.

In Australia, corporate activity and portfolio sales underpinned volumes in 2013. However, after a record four years, the opportunities are becoming scarce, which is likely to affect transaction volumes in 2014.

Asia Pacific hotel transaction volumes are projected to moderate in 2014 to around US$6 billion. Fewer landmark deals will result in a reduction in volumes, while deal flow will remain buoyant due to a greater depth of small asset sales. Volumes will also be constrained by a lack of investment opportunities.


Published 3rd February 2014

For more information, contact:

  jll-arthur-de-haast-london
Arthur de Haast
Head of International Capital Group and CEO Corporate Finance EMEA. Chairman Hotels & Hospitality Group
+44 20 7399 5873
arthur.dehaast@eu.jll.com
 
  jll-mark-wynne-smith-london
Mark Wynne Smith
Global CEO, Hotels & Hospitality Group
+44 20 7399 5983
mark.wynne-smith@eu.jll.com
 
  arthur adler
Arthur Adler
Managing Director & CEO Americas, Hotels & Hospitality Group
+1 212 812 5830
arthur.adler@am.jll.com
 
 
Scott Hetherington
CEO Asia, Hotels & Hospitality Group
+65 6438 3897
scott.hetherington@ap.jll.com
 
 
Craig Collins
CEO, Hotels & Hospitality Group, Australasia
+61 2 9220 8515
craig.collins@ap.jll.com
 
  jones lang lasalle - christoph härle - munich
Christoph Härle
CEO Continental Europe, Hotels & Hospitality Group
+49 89 290088 180
christoph.harle@eu.jll.com
 
  jll-jonathan-hubbard-london
Jonathan Hubbard
CEO Northern Europe
+44 20 7399 5530
jonathan.hubbard@eu.jll.com
 

For more Jones Lang LaSalle Research visit our country sites:

US
UK
Brazil
Russia
India
China
more…
 

© Copyright 2014 Jones Lang LaSalle Privacy Statement  | Terms of Use  | Site Map
Global Market Perspective Jones Lang LaSalle