London, November 13th, 2000 — Hotel investors, owners, developers and financiers unanimously agreed that the future of the European hotel operating and investment markets looks rosy. Meeting at the 12th Annual European Hotel Industry Investment Conference at London, delegates used a live voting system to predict future market movements. The event is co-sponsored by American Express, Arthur Andersen, Jones Lang La Salle Hotels and Schroder Salomon Smith Barney.
Nick Marsh, Executive Vice President at Jones Lang LaSalle Hotels forecast that the European hotel market looks set to capture an increasing proportion of the expected €1,000 billion increase in pension fund investment into Europe over the next 20 years. Pension funds are anticipated to up-weight their exposure to property from 10% to 15%, boosting capital flows into the European property market. The industry anticipates investment activity to be boosted more quickly than that, with 61% of delegates expecting transactional activity to increase in 2001.
Why will the institutions active in Europe increasingly look towards the hotel market? Jacques Gordon, International Director at LaSalle Investment Management states that the hotel sector offers a greater opportunity to balance risk and reward, encouraging funds to diversify from traditional forms of real estate investment. Operators are also becoming more flexible and are more accommodating of the main stream real estate investment market. Evidence of this capital inflow is that 37% of the audience expect European funds will provide the most capital to the European sector in 2001, whilst 18% believed direct institutional investors would provide the majority of cash.
Looking back on the first nine months of the year, Continental Europe has seen a significant increase in transactional activity – up 82% said Marsh. The reasons for this increase include the ‘cashed-up’ operating companies seeking to grow their portfolios, introduction of the euro, increasing transparency, tax reform, increased liquidity in the debt markets and viable exit opportunities presented to owners with the rising markets. In addition to this, the Continental European hotel markets are at an attractive stage in the cycle. Nick van Marken, Partner – Hospitality Consulting Services EMEIA at Arthur Andersen stated that almost all European markets enjoyed a 15% increase in room yield ytd September 2000, with the strongest contribution coming from room rate. Airport markets have been particularly hot in 2000 and in most cases have outperformed their city centre competitors.
Asked where investment would be targeted, the audience responded Southern Europe is hot on the investment agenda with Spain ranked as the most important market to penetrate in Southern Europe, followed by Portugal, Italy and Greece. The audience remained optimistic as to the future with 61% forecasting further improvement in hotel performance in Western Europe in 2001 and 64% expecting gains in Central Europe. van Marken agreed with this, adding that Continental European hotel markets should continue to improve in the medium-term, given the relatively stable supply base.
The transformational effects of e-commerce on the hotel investment market were considered, in terms of both the physical asset as well as that of the customer. Rosemary Feenan of Jones Lang LaSalle predicted radical changes in our work and leisure spheres, with new hotel locations emerging to tap the cybersavvy traveller. Industry experts recognised the force of change as 51% of the audience concluded that working practices in the new economy will add new locations to the strategy map.
Saj Arshad, Vice President, Head of Interactive Consumer Services at American Express predicted that before long there will exist a highly profitable chain of wired hotels in major cities world wide that will be exclusively bookable online. Industry experts put the time frame at around three to five years (63% of the audience voted for this option) before we will see owners and operators leveraging full-scale integrated web applications.
Use of the internet as a means of booking accommodation can only grow. Ron McNair, the Partner in charge of Hospitality and Leisure at Arthur Andersen in the US asked the audience to estimate the level of direct bookings made via the internet in 2003. In response, 46% of the voters thought that more than 25% of corporate bookings would be made via the web, whilst 28% of the audience expected to see more than 25% of leisure bookings over the internet in 2003.
Copies of presentations can be accessed via the internet at:
www.hotelbenchmark.com/euroconf
www.joneslanglasallehotels.com
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Jones Lang LaSalle Hotels is the largest and most qualified specialist hotel investment banking services group in the world. Through its 18 dedicated offices and the global Jones Lang LaSalle network of 6,000 professionals across more than 100 key markets in almost 35 countries, Jones Lang LaSalle Hotels is able to provide clients with value added investment opportunities and advice.
Jones Lang LaSalle Hotels recent two year success story included the sale of 17,027 hotel rooms to the value of US$2.2 billion in 75 cities and advisory expertise for 200,036 rooms to the value of US$29.8 billion across 278 cities. Jones Lang LaSalle Hotels’ services include transactions, mergers & acquisitions, financial advice & capital raising, valuation & appraisal, asset management, strategic planning, operator assessment & selection
and industry research.
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