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
Mass Timber | Jun 26, 2024
Oregon State University builds a first-of-its-kind mass timber research lab
In Corvallis, Oreg., the Jen-Hsun Huang and Lori Mills Huang Collaborative Innovation Complex at Oregon State University aims to achieve a distinction among the world’s experimental research labs: It will be the first all-mass-timber lab meeting rigorous vibration criteria (2000 micro-inches per second, or MIPS).
Healthcare Facilities | Jun 25, 2024
Register today! BD+C live webinar: Key Trends in the Healthcare Facilities Market for 2024-2025
Join the Building Design+Construction editorial team for this live webinar on key trends, innovations, and opportunities in the $65 billion U.S. healthcare buildings market. This free live webinar, hosted by BD+C editors, will take place Thursday, July 11 at Noon ET / 11 AM Central.
Sustainability | Jun 24, 2024
CBRE to use Climate X platform to help clients calculate climate-related risks
CBRE will use risk analysis platform Climate X to provide climate risk data to commercial renters and property owners. The agreement will help clients calculate climate-related risks and return on investments for retrofits or acquisitions that can boost resiliency.
MFPRO+ News | Jun 24, 2024
‘Yes in God’s Backyard’ movement could create more affordable housing
The so-called “Yes in God’s Backyard” (YIGBY) movement, where houses of worship convert their properties to housing, could help alleviate the serious housing crisis affecting many communities around the country.
Student Housing | Jun 20, 2024
How student housing developments are evolving to meet new expectations
The days of uninspired dorm rooms with little more than a bed and a communal bathroom down the hall are long gone. Students increasingly seek inclusive design, communities to enhance learning and living, and a focus on wellness that encompasses everything from meditation spaces to mental health resources.
Museums | Jun 20, 2024
Connecticut’s Bruce Museum more than doubles its size with a 42,000-sf, three-floor addition
In Greenwich, Conn., the Bruce Museum, a multidisciplinary institution highlighting art, science, and history, has undergone a campus revitalization and expansion that more than doubles the museum’s size. Designed by EskewDumezRipple and built by Turner Construction, the project includes a 42,000-sf, three-floor addition as well as a comprehensive renovation of the 32,500-sf museum, which was originally built as a private home in the mid-19th century and expanded in the early 1990s.
Building Technology | Jun 18, 2024
Could ‘smart’ building facades heat and cool buildings?
A promising research project looks at the possibilities for thermoelectric systems to thermally condition buildings, writes Mahsa Farid Mohajer, Sustainable Building Analyst with Stantec.
University Buildings | Jun 18, 2024
UC Riverside’s new School of Medicine building supports team-based learning, showcases passive design strategies
The University of California, Riverside, School of Medicine has opened the 94,576-sf, five-floor Education Building II (EDII). Created by the design-build team of CO Architects and Hensel Phelps, the medical school’s new home supports team-based student learning, offers social spaces, and provides departmental offices for faculty and staff.
Mass Timber | Jun 17, 2024
British Columbia hospital features mass timber community hall
The Cowichan District Hospital Replacement Project in Duncan, British Columbia, features an expansive community hall featuring mass timber construction. The hall, designed to promote social interaction and connection to give patients, families, and staff a warm and welcoming environment, connects a Diagnostic and Treatment (“D&T”) Block and Inpatient Tower.
Concrete Technology | Jun 17, 2024
MIT researchers are working on a way to use concrete as an electric battery
Researchers at MIT have developed a concrete mixture that can store electrical energy. The researchers say the mixture of water, cement, and carbon black could be used for building foundations and street paving.
