Cautious yet confident may best describe the global hotel market’s investor sentiment according to JLL Hotels & Hospitality’s annual Hotel Investment Outlook. The newly issued report projects global hotel investment volume will reach $67.2 billion, nearly equal to 2018’s total of $67.7 billion. While there is anticipated moderating economic growth and geopolitical uncertainty, hotel property performance remains strong, travel and tourism are slated for another record year and investors seeking more yield are increasingly turning their sights toward hotels.
The firm’s Hotel Investment Outlook is a forward-looking, global analysis of trends affecting the hotel investment market. The report outlines several key investment drivers for 2019:
- Robust levels of global fundraising activity for hotel investments. Close-ended private funds raised $28.8 billion globally in vehicles with either a hotel focus or a hotel component as part of a broader strategy in 2018. JLL anticipates these funds will pursue more large-scale investments to efficiently deploy capital and shift strategies toward private debt fundraising.
- Hotels’ appeal to generalist investors. During the past five years, approximately 70.0 percent of global hotel investments were made by generalist investors who invest in multiple asset classes. Given hotels’ attractive yield profile, JLL expects investors will continue to seek entry into real estate, particularly hotels.
- Increased international capital flows. In 2018, the largest capital inflows targeted Europe, driven by Middle East and Asian investors. JLL anticipates international activity will increase in 2019, driven in part by inflows to Europe, North America-based investors turning focus toward markets across Asia and cross-border capital exploring portfolio opportunities, including those with assets located outside of primary markets.
- Brand and hotel company M&A activity. Top hotel brands account for less than one-third of hotel rooms globally and in 2019, JLL expects to see more targeted acquisitions of unique concepts and locations to complement existing product offerings.
“Investment activity exceeded expectation in 2018 and we believe 2019 will be another strong year for global hotel investment, with a significant amount of debt and equity liquidity and competitive bidding for assets, given continued strength in fundamentals,” said Mark Wynne Smith, Global CEO, JLL Hotels & Hospitality. “Notwithstanding the more cautious backdrop, ongoing large portfolio and entity-level activity, hotels’ attractive yield profile and record levels of dry powder will drive global hotel investment momentum.”
The Americas: 2018 performance, 2019 projection
Americas’ activity in 2018 was fueled by luxury hotel sales and resort hotel sales in the United States, which posted a 76.0 percent and 40.0 percent year-over-year volume increase, respectively and helped drive a 42.0 percent increase in total U.S. transaction volume over 2017. In 2019, JLL anticipates total transaction volume for the Americas to match 2018’s figure of $36.5 billion.
According to the Hotel Investment Outlook, Americas transaction volume in 2019 will be driven primarily by high-profile resorts, upper-tier select service hotel portfolios and asset and entity-level portfolio activity. JLL expects private equity groups to continue its role as the largest buyer group of hotels and for hotel REITs to become more active in acquisitions.
“Hotel investment and strategy will be heavily linked to opportunity – what is available in the market?” said Gilda Perez-Alvarado, Americas CEO, JLL Hotels & Hospitality. “Irreplaceable properties, access to methods to efficiently deploy large amounts of capital and top locations are all key factors affecting 2019’s investment environment.”
JLL’s Hotels & Hospitality Group has completed more transactions than any other hotels and hospitality real estate advisor over the last five years, totalling more than $63.2 billion worldwide. The group’s 350-strong global team in over 20 countries also closed more than 5,420 advisory, valuation and asset management assignments. Our hotel valuation, brokerage, asset management and consultancy services have helped more hotel investors, owners and operators achieve high returns on their assets than any other real estate advisor in the world.
