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February 23, 2017

Private equity buyers have scaled back their hotel acquisitions in Europe with institutional money increasingly stepping into the fold.

In 2016, private equity investors deployed significantly less capital in the hotel real estate market compared with 2015, making way for institutional investors who accounted for the largest uplift in buying activity last year, according to JLL’s Hotel Investor Outlook report.

“Transaction volumes by institutional investors made up 20 percent of market share, four times the proportion seen in 2015 and these buyers are expected to remain key players in the UK and EMEA market,” said Philip Ward, EMEA CEO of JLL’s Hotels & Hospitality Group.

“Private equity buyers stand to see some increases but no major jump,” he added.

UK volumes on the up
Despite the aftermath of the Brexit vote weighing on investors’ minds, London is expected to see an increase in hotel investment as volumes with figures predicted to rise from US$20.5 billion dollars in 2016 to US$22 billion to £23 billion in 2017 across the region.

Chinese capital will be largely responsible for the increased demand in the UK as these investors continues their search for trophy assets globally.

“Despite geo-political issues, terrorism, and economic volatility, the tourism industry has shown resilience and travel remains on the increase,” added Ward. “While London remains in the top spot of desired investment destinations, the lack of available product for sale and the gap between buyer and seller expectations has drawn investors to key regional markets and this is evident through the significant increase in transaction activity in Birmingham and Manchester.”.

JLL also expects further consolidation and M&A activity across the sector as brands and management companies look to boost performance in light of falling RevPar.

Click to read more about why gateway cities remain top choice for hotel investors

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