Global hotel investment volumes recovered strongly this year after reaching the lowest level of the decade in 2009. Following this strong bounce back, Jones Lang LaSalle Hotels forecasts that global hotel transaction volume will increase a further 30 to 40 percent in 2011, according to initial results from the firm’s Hotel Investment Outlook 2011 report. The expected increase marks the second consecutive year of improvement.
Following a very challenging year in 2009, characterized by frozen liquidity, stalled transactions, and drastic drops in hotel performance and values in many hotel markets globally, 2010 signaled dramatic improvement and a fresh pace for opportunistic, cashed-up buyers. The across-the-board rebound in operating fundamentals and the broad cross-section of equity capital in the market is motivating both buyers and sellers. Having gathered pace in 2010, volumes are expected to continue to rise substantially in 2011, reaching $28 to $30 billion. Among the active buyers, the firm anticipates to see REITs, institutional investors, and private and high-net-worth investors with opportunistic capital investing next year.
“With more stock hitting the market in 2011, there will again be an increased depth and breadth of opportunities for investors,” says Arthur de Haast, global CEO of Jones Lang LaSalle Hotels. “Until liquidity improves in the debt markets, however, the most acquisitive hotel investors will likely be those that make all-equity purchases or structure acquisitions with low leverage levels.”
Debt remains selectively constrained in the markets that relied heavily on leverage in the lead-up to the global recession, such as the U.S., U.K., Ireland, Japan, and Spain, but it is easing. Nevertheless, new lending will remain fairly limited until lenders fully rebuild their balance sheets and write down asset values, a delicate process which needs to be carefully balanced and is taking longer than expected, deHaast notes.
