After a record 2015, the global hotel investment market looks set for a ‘more measured’ year with volumes predicted to reach US$70 billion, according to a new report from JLL.
Transactions topped US$85 billion last year, the second-highest year on record.
“2015 was an exceptional year and in 2016 we’re likely to see a more measure approach to transactions and we’re predicting overall volumes in the region of US$70 billion,” said Global CEO of JLL’s Hotels & Hospitality Group, Mark Wynne-Smith.
While the prediction marks a decline on the previous years’ volumes, Wynne-Smith expects activity to remain robust. “The areas of good news are around single assets; we think private equity will be cleaning up their portfolios so we’ll see single asset sales to increase by about 35 percent.”
Several large, once-in-a-cycle portfolio deals closed in throughout last year, which were largely responsible for the surge in total transaction volumes. Blackstone’s purchase of Strategic Hotels and Resorts in the fourth quarter, for example, which reportedly fetched US$6 billion. With portfolios of this size few and far between, the market is set for a period of consolidation.
“The industry remains comparatively fragmented,” added Wynne-Smith. “Hotel operators are looking for acquisitions that allow them to achieve scale and reach and that’s going to allow them to invest in innovation.”
Meanwhile, the United States will remain the most liquid investment market this year with US private equity funds looking to distribute their cash globally but Europe is likely to attract the lions’ share of foreign capital flow.
“The global real estate market is moving at multiple speeds and looking into 2016, the nature of deals will vary from region to region,” said Jessica Jahns, head of EMEA hotels and hospitality research, JLL. “EMEA reported hotel volumes of 45 billion in 2015, an uplift of 45 per cent and is expected to be the largest destination of offshore capital this year.”
However, investors’ focus is expected to shift away from the traditional gateway cities of Paris and London. Instead, they’re expected to focus on secondary cities such as Birmingham and Manchester in the UK, and in the US, cities across the mid-West in the US – will attract a greater proportion of capital.
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Global CEO, Hotels & Hospitality Group