Jones Lang LaSalle Hotels

Europe's hotel markets are better placed to weather the economic downturn in the US, than the previous recession, according to a recently released report by Jones Lang LaSalle Hotels entitled “2001: Europe’s Hotel Markets To Ride Out The Uncertainty?”

Looking across Europe’s hotel markets in 2001 gives one more faith in the market compared to the last economic downturn in the early 1990s. “Supply and demand fundamentals are much more closely aligned and we appear to be in a stronger supply-based position” stated Arthur de Haast, Managing Director, Europe at Jones Lang LaSalle Hotels. From an average annual growth of 6.8% between 1990 and 1992, supply growth averaged just 4.0% annually across major European markets between 1998 and 2000 (London, Paris, Stockholm, Frankfurt, Barcelona and Amsterdam).

Most markets also show a less marked pattern of highs and lows, with both supply and demand growth more manageable, although Mr de Haast adds that “local authorities can play an important role by keeping planning permissions at a sustainable level in order to maintain this balance”.

“Whilst there has been a reduction in US demand, thus far we have seen the upper segment of the European hotel market bear the brunt of this with the curtailing of business travel” stated Mr de Haast. Having said this, as well as a more manageable supply base, one of the factors in Europe’s favour is that the economy is vastly more global than the early 1990s and there is a larger core demand base. “Thus the corporate market is likely to rebound much faster than the last downturn – today we have more global organisations compared to just multi-national companies as in the last recession” adds Mr de Haast.

Paris, with its low and stable supply growth, was the least affected market during the previous recession, and appears to be in a similar position should Europe face a major economic downturn. According to the report, Paris’ supply levels expanded by 0.4% p.a. during 1998 – 2000 compared to 1.3% between 1990 and 1992. Paris is more reliant on US demand than some other European cities, however “the impact has been restricted to the top tier of hotels in Paris with mid-scale hotels expected to remain fairly resilient throughout this contraction in US demand” said Mr de Haast.

Amsterdam and Barcelona have experienced a lower supply growth over the period 1998 – 2000 compared to the previous recession, placing them in a much improved position. Growth from well-diversified demand sources has enabled operating performance to flourish. “The moderate supply growth combined with the strong demand base suggests that these markets should be in a better position to weather an economic slowdown”.

London and Frankfurt have recently experienced greater supply growth compared to the last recession, however this has been matched by robust demand growth. Both cities are at the heart of the global financial community and as a result have enjoyed increasing demand levels. This has also stimulated significant increases in average rate.

Looking to the investment markets, the current uncertain conditions where investment sentiment is slightly weaker, represents a good time to buy. “As long as the local market fundamentals are relatively well balanced, there are opportunities for those investors with a more medium-term view to achieve attractive returns” concludes Mr de Haast.

EUROPE: A SWOT ANALYSIS
Strengths	Supply control in many markets. Euro low against the dollar, stimulating inbound travel from the USA. Relative interdependence across the euro-zone providing some insulation from situation in USA. Most markets in fairly strong position in the current cycle. Better alignment of supply and demand growth trends. Consumer confidence in most markets, and the US, currently holding up better than the manufacturing sector.
Weaknesses	Economies across the euro-zone linked, particularly by exports – poor performance in one area will affect others. UK quite heavily reliant on US demand, and already experiencing a drop from this market segment.
Opportunities	Slowing of construction in some markets as investors are more cautious. Interest rate cuts to stimulate consumer demand. Accelerated growth following economic downturn. Investment opportunities where sentiment is weaker. Consumer confidence is still holding up on both sides of the Atlantic.
Threats	Supply growth outstripping demand, particularly if planning permissions continue to be issued. If US economy enters a recession, a dramatic drop in demand from this sector. Influential economies in Europe eg Germany and the UK dragging down others initially better placed. US situation causing an erosion in consumer confidence and curtailing travel irrespective of economic situation. Business travel on hold during economic uncertainty.

For further information or a copy of the report, please contact either Anna Town on 020 7399 5675 or Charlotte Freeman in the Press Office on 020 7399 5616.

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Jones Lang LaSalle Hotels is the world's largest and most qualified specialist hotel investment banking services group. Through its 18 dedicated offices and the Jones Lang LaSalle network in more than 100 key markets it provides services in transactions, mergers and acquisitions, financial advice and capital raising, valuation and appraisal, asset management, strategic planning, operator assessment and selection and industry research.

To Visit The Jones Lang LaSalle Hotels Web Site Go To: http://www.joneslanglasallehotels.com

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