Although global hotel deal volume is projected to remain in line with the most recent three-year average in 2013, Jones Lang LaSalle’s Hotels & Hospitality Group believes that signs point to an on-going uptick in Americas hotel transactions activity sooner rather than later. Jones Lang LaSalle revealed five forces which will drive the hotel investment market during the next five years at the Americas Lodging Investment Summit (ALIS) recently at the J.W. Marriott L.A. LIVE.
“There will be a significant amount of property coming to market in 2013 from a combination of the de-leveraging occurring as $55 billion of CMBS matures in the next few years and we’ll see investors who bought earlier in the cycle want their capital gains and they’ll sell,” said Arthur Adler, Americas CEO of Jones Lang LaSalle’s Hotels & Hospitality Group. “You can’t underestimate the composition of hotel ownership over a long period of time as many hotels today are in the hands of traders versus holders.”
Investors should watch the following five key forces and their impact on the hotel market:
1. Boom or bust?: Global deal volume is projected to reach as high as $33 billion this year, in line with the most recent three-year average, and could rise to $50 billion to $70 billion in the medium term. Foreign investors, primarily groups from Asia and the Middle East, have already put $3.2 billion in off-shore capital into hotels in the United States since 2010 and aren’t expected to slow down in the coming years.
2. Hotel transaction level drivers: The United States will account for half the global deal activity as fundamentals remain strong. Improving industry fundamentals, the availability and cost of capital, REIT stock prices, the amount of product on the market and the composition of hotel ownership all have a significant impact on transactions volume and will continue to drive growth.
3. Cash is king, but debt is on its way back: The formidable return of the CMBS market last year improved pricing and terms for borrowers, while drawing other lenders into the hospitality arena. Debt availability should reach a six-year high as domestic and offshore banks, insurance companies, debt funds and mortgage REITs will augment the increased CMBS lending.
4. Increasing the value of a hotel: As top-line revenue rebounds, owners will fight to avoid profit erosion and maintain asset value through increased emphasis on more dynamic and efficient revenue management and analytical tools. Increasing competition for traveler loyalty and third-party travel agents will challenge operators and come at a cost. Hotels will need to invest more in digital marketing efforts and leverage the use of online travel agencies as part of a diversified distribution channel strategy.
5. Let the games begin in Latin America: Economies in Latin America are expected to grow by four percent annually through 2020 and the region’s share of global GDP is slated to increase by 25 percent from 2000 to 2020. Economic reforms, growth in income per capita stemming from increased economic decentralization in several key markets and events such as the 2014 FIFA Soccer World Cup and Summer Olympic Games in Brazil will make the region attractive for growth in the lodging sector. Brazil, Mexico, Colombia, Peru and Chile will be at the forefront of the increase.
As operating fundamentals remain strong, hotels should remain a favored asset class globally among lenders, institutional and offshore investors. With debt simultaneously becoming more available and competitively priced, asset values and transaction volume should continue to rise.
About Jones Lang LaSalle's Hotels & Hospitality Group
Jones Lang LaSalle’s Hotels & Hospitality Group serves as the hospitality industry’s global leader in real estate services for luxury, upscale, select service and budget hotels; timeshare and fractional ownership properties; convention centers; mixed-use developments and other hospitality properties. The firm’s more than 265 dedicated hotel and hospitality experts partner with investors and owner/operators around the globe to support and shape investment strategies that deliver maximum value throughout the entire lifecycle of an asset. In the last five years, the team completed more transactions than any other hotels and hospitality real estate advisor in the world totaling nearly US$25 billion, while also completing approximately 4,000 advisory and valuation assignments. The group’s hotels and hospitality specialists provide independent and expert advice to clients, backed by industry-leading research.
For more news, videos and research from Jones Lang LaSalle’s Hotels & Hospitality Group, please visit: www.jll.com/hospitality or download the Hotels & Hospitality Group’s app from the App Store.
About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet. Its investment management business, LaSalle Investment Management, has $47.0 billion of real estate assets under management. For further information, visit www.jll.com.
Related Stories
Hotel Facilities | Jul 26, 2023
Hospitality building construction costs for 2023
Data from Gordian breaks down the average cost per square foot for 15-story hotels, restaurants, fast food restaurants, and movie theaters across 10 U.S. cities: Boston, Chicago, Las Vegas, Los Angeles, Miami, New Orleans, New York, Phoenix, Seattle, and Washington, D.C.
Sustainability | Jul 26, 2023
Carbon Neutrality at HKS, with Rand Ekman, Chief Sustainability Officer
Rand Ekman, Chief Sustainability Officer at HKS Inc., discusses the firm's decarbonization strategy and carbon footprint assessment.
Sports and Recreational Facilities | Jul 26, 2023
10 ways public aquatic centers and recreation centers benefit community health
A new report from HMC Architects explores the critical role aquatic centers and recreation centers play in society and how they can make a lasting, positive impact on the people they serve.
Multifamily Housing | Jul 25, 2023
San Francisco seeks proposals for adaptive reuse of underutilized downtown office buildings
The City of San Francisco released a Request For Interest to identify office building conversions that city officials could help expedite with zoning changes, regulatory measures, and financial incentives.
Urban Planning | Jul 24, 2023
New York’s new ‘czar of public space’ ramps up pedestrian and bike-friendly projects
Having made considerable strides to make streets more accessible to pedestrians and bikers in recent years, New York City is continuing to build on that momentum. Ya-Ting Liu, the city’s first public realm officer, is shepherding $375 million in funding earmarked for projects intended to make the city more environmentally friendly and boost quality of life.
Market Data | Jul 24, 2023
Leading economists call for 2% increase in building construction spending in 2024
Following a 19.7% surge in spending for commercial, institutional, and industrial buildings in 2023, leading construction industry economists expect spending growth to come back to earth in 2024, according to the July 2023 AIA Consensus Construction Forecast Panel.
Hotel Facilities | Jul 21, 2023
In Phoenix, a former motel transforms into a boutique hotel with a midcentury vibe
The Egyptian Motor Hotel’s 48 guest rooms come with midcentury furnishings ranging from egg chairs to Bluetooth speakers that look like Marshall amplifiers.
Office Buildings | Jul 20, 2023
The co-worker as the new office amenity
Incentivizing, rather than mandating the return to the office, is the key to bringing back happy employees that want to work from the office. Spaces that are designed and curated for human-centric experiences will attract employees back into the workplace, and in turn, make office buildings thrive once again. Perkins&Will’s Wyatt Frantom offers a macro to micro view of the office market and the impact of employees on the future of work.
Healthcare Facilities | Jul 19, 2023
World’s first prefab operating room with fully automated disinfection technology opens in New York
The first prefabricated operating room in the world with fully automated disinfection technology opened recently at the University of Rochester Medicine Orthopedics Surgery Center in Henrietta, N.Y. The facility, developed in a former Sears store, features a system designed by Synergy Med, called Clean Cube, that had never been applied to an operating space before. The components of the Clean Cube operating room were custom premanufactured and then shipped to the site to be assembled.
Performing Arts Centers | Jul 18, 2023
Perelman Performing Arts Center will soon open at Ground Zero
In September, New York City will open a new performing arts center in Lower Manhattan, two decades after the master plan for Ground Zero called for a cultural component there. At a cost of $500 million, including $130 million donated by former mayor Michael R. Bloomberg, the Perelman Performing Arts Center (dubbed PAC NYC) is a 138-foot-tall cube-shaped building that glows at night.
