EMEA 2013 Hotel Transactions Grow by 17 Percent

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Hotel transaction volumes in Europe, Middle East and Africa increased by 17 percent in 2013 to $13.2 billion, led by the core markets of U.K., France and Germany.

In 2014, hotel transactions are expected to grow by more than 20 percent to $16 billion, JLL said in their Hotel Investment Outlook report.

"Although some markets are at different stages of the recovery curve, underlying sentiment is much more positive, leading to increased interest in hotel investment," said Jon Hubbard, CEO Northern Europe at Jones Lang LaSalle's Hotel & Hospitality Group.

Transactions have been bolstered by continued sell-down of over-leveraged assets in the control of the lenders, as well as many private equity funds reaching the end of their life-cycle, the firm states.

Debt conditions have improved in Europe, with more banks lending to the hotel sector.

"We expect to see an increased appetite from institutional investors," Mr. Hubbard said. "Not only for direct investment but to also place large amounts of money into the debt market as they seek to increase their allocation to higher yielding real estate and looking to the hotel sector as part of a well-diversified real estate portfolio."

The core markets of the U.K., France and Germany are expected to provide good opportunities for investors in 2014.

Besides established European lenders, such as Aareal, a growing number of domestic and overseas banks are lending to the market including: the Bank of China, United Overseas Bank, RBS and a number of Middle Eastern banks, JLL reports.

The report found an increase in cross-border investment, particularly from U.S-based private equity funds looking at core markets in Europe and institutional or opportunistic assets.
 
"Investors from Asia are keen to tap into this region too, as the European real estate market offers some very attractive returns and medium term growth prospects compared to their domestic markets," Christoph Härle, CEO Continental Europe at JJL's Hotel & Hospitality Group, said in the report. "In the last 12 months, more Chinese investors have arrived on European soil, and we expect this trend to continue as the number of outbound travelers from China swells."

The U.K. enjoyed the largest share of investment, totaling $4.7 billion, representing 37 percent of the total volume in 2013. The growth was led by three large portfolio deals in the first quarter. This growth is expected to continue as revenue per average room growth in London should increase four percent in 2014.

France had the second highest share at 18 percent or $2.3 billion, led by a number of trophy asset sales and notable portfolio deals -- including Groupe du Louvre and Mandarin Oriental Paris. French hotel market transactions are expected to be subdued in 2014, considering the size of the transactions in 2013.

The German hotel industry is expected to remain one of Europe's most sought-after hotel markets.

"Distressed areas such as Spain, Italy and Ireland will also offer good buys and investors will be eager to move on well-positioned assets in these markets," Mr. Härle said. "The CEE has seen a good number of assets trading in 2013 after years of slow activity and we would expect this trend to continue in the core markets."