Hotel investment outlook changing

Hotel investment outlook changing

Generalist and international investors expected to drive market this year, says JLL

Carlton Hotel Bangkok Sukhumvit, situated on Sukhumvit Road between Asok and Phrom Phong, opened on Feb 19, 2020.
Carlton Hotel Bangkok Sukhumvit, situated on Sukhumvit Road between Asok and Phrom Phong, opened on Feb 19, 2020.

Investor sentiment for hotel properties remains cautiously optimistic, as investors navigate international, political and economic dynamics in addition to the coronavirus outbreak, according to JLL Hotels & Hospitality.

Global hotel transaction activity this year will be shaped by record levels of real estate fundraising and interest from new buyers, the company says in its annual Hotel Investment Outlook.

Global hotel transaction volumes in 2019 reached US$66 billion, bolstered by a resilient global economy and continued demand from domestic and international travellers. However, the length of the current market cycle, trade conflict and Brexit uncertainty led to more investor caution, resulting in a 6% decrease in total hotel market liquidity compared with 2018.

In 2020, global hotel liquidity is expected to decrease by 10-15% as investors adopt a slightly more selective approach. However, the pipeline for deal flow activity will continue across all regions.

Two buyer groups are expected to account for the lion's share of hotel investment activity this year. Generalists who invest in multiple asset classes will continue to be the largest hotel investor group given their mandate to deploy capital. They represented 70% of investment volume in 2019 versus nearly 60% a decade ago.

Additionally, international capital will be a key provider of global liquidity, with capital outflow volume expected to rise across North America, Europe and Asia.

Hotel transaction volumes in Asia-Pacific rose by 44% in 2019, exceeding projections of a 25-30% increase from 2018, surpassing $12 billion for the second time. The region's remarkable performance was supported by several high-profile deals in South Korea, Singapore and Australia.

However, deal value in 2020 in Asia-Pacific is expected to decrease, a reflection of both the notable amount of large transactions in 2019 and an anticipation of moderate activity in the first half of 2020 because of the ongoing impact of the novel coronavirus and investors' wait-and-see approach.

The JLL report also identifies three key global trends to watch for in 2020:

The rise of affordable lifestyle hotels: Changing guest demands and increased competition from alternative accommodation providers such as Airbnb have fuelled hotel company interest in smaller, more technology-focused hotels located in urban areas. The number of rooms in the affordable lifestyle brand sector has more than doubled worldwide over the past five years.

The emergence of first-time hotel buyers: Investors new to commercial real estate, as well as those with experience in other commercial property sectors, are increasingly turning to hotels in search of higher yields and diversification.

The increase of the hospitality operating model: As real estate owners and landlords acknowledge that their end-users -- whether hotel guests, retailers or corporate occupiers -- expect a certain level of service and a memorable experience, more real estate products with hospitality elements will proliferate, such as hotels offering co-working spaces.

To download the full report, visit

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