Hotel Investor Sentiment Survey

Positive Prospects for the EMEA Hotel Market in 2013

Latest analysis from Jones Lang LaSalle’s Hotels & Hospitality Group shows that trading expectations across the sector remain positive for the next two years, with average cap rate requirements at 7.1% and therefore very close to their pre-crisis low of 7.0% in 2007.

Jones Lang LaSalle Trading performance expectations are particularly strong for Munich, Berlin, Paris and Moscow. Short term trading sentiment is still positive for London although weaker due to the current challenges faced by London hoteliers such as new supply and weak economic prospects. However, the on-going recession in Southern Europe means that investors are anticipating trading performance to decline in Lisbon, Madrid and Milan in the next six months.

The survey also tracked where investors feel development prospects are the most attractive. The highest levels were recorded in Moscow (45%),  the French Riviera (45%) and Istanbul (38%). The average development level across the region was recorded at 20%. The cities that investors saw as being hot markets for acquisitions included  Madrid (89%),  Milan (82%) and Dublin (78%.) These were all well above the recorded 57% average for EMEA acquisitions and led by opportunistic investor interest.

Low cap rates are mirroring a growing confidence in hotel real estate and improving markets, backed by a general improvement in financing conditions in a number of markets where new lenders have entered the hotel arena such as insurance companies and debt funds . Corporate and government bond yields are also unappealing low which is driving lenders and investors  to consider the prospect of returns from investing in hotels.

London posted the lowest internal rate of return (IRR) requirements at 11.9%, followed by Paris at 12.1% and Munich at 12.3%.

The report has also found that Dublin has had an impressive comeback since the crisis period of 2008 and 2009, with Revenue Per Available Room (RevPAR) growing by a yearly average of nearly 12% since 2010.

Jonathan Hubbard, CEO Northern Europe, Jones Lang LaSalle's Hotels and Hospitality Group, said: “Our analysis shows good prospects in both the short and medium term, which is encouraging given it has been a challenging and competitive environment so far this year. Dublin is a case in point. After no transactions of note between 2008 and 2010 there has been increased activity in the last 12-18 months.  With 78% of respondents identifying Dublin as a hot market, this is set to continue as more product is released. The UK regions, despite short term trading uncertainty, are attracting strong investor interest, who are confident in mid-term growth."

Christoph Harle, CEO Continental Europe, Hotels & Hospitality Group said: “Results underpin the continued confidence in prime markets although opportunities seem to be emerging, particularly in Southern Europe where investment values are often attractively low. With trading performance set to bounce back in the medium term, investors are developing a particularly strong appetite for hotels in Madrid, Milan and Rome. Other core European markets are seen as more stable and appealing for institutional investor types with adverse risk appetite.”

*The survey into sentiment was conducted with 60 respondents across the industry, including Owner operators, private equity firms, listed REITs and other real estate investors

*The full survey can be downloaded here



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