According to JLL’s Hotel Investment Outlook, global hotel investment volume is projected to reach $70 billion in 2016. Although down 15 or 20 percent from 2015, when marquee mergers involving Chinese investors created an unusually high volume of investments, the projection for 2016 is still greater than it was for 2014. The Americas region is forecast to post $37 billion in transactions, down from $46 billion in 2015.
JLL expects several trends to take shape in 2016:Â
Firstly, thanks to the completion of large mergers started in 2015, the hotel industry, will become more consolidated based on deals between operators and real estate owners in the form of portfolio transactions or public-to-private trades.
Next, secondary markets will continue to grow. Primary market yields are close to historic lows, so the next spot investors will look is at secondary cities in the U.S., UK, Germany, Spain, and Japan.
Finally, cross-border activity will continue to grow, with investors staking claims in foreign markets. In 2015, roughly $30 billion in capital acquiring hotels crossed national borders. Inbound capital will continue to target the U.S. and Western Europe.
“Public markets are rewarding growth, creating a strong case for hotel brand consolidation,” says Mark Wynne Smith, global CEO of JLL’s Hotels & Hospitality group. “Hotel brands are on a neverending quest to bolster their pipeline and with the natural attrition in properties and limits to new supply growth, the surest way is often by acquiring operators with strategic management or franchise contracts. These larger, consolidated companies also have an additional benefit of more clout to readily respond to broader influences in the industry.”
A full copy of JLL’s report is available for download here.
