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
AEC Innovators | Mar 3, 2023
Meet BD+C's 2023 AEC Innovators
More than ever, AEC firms and their suppliers are wedding innovation with corporate responsibility. How they are addressing climate change usually gets the headlines. But as the following articles in our AEC Innovators package chronicle, companies are attempting to make an impact as well on the integrity of their supply chains, the reduction of construction waste, and answering calls for more affordable housing and homeless shelters. As often as not, these companies are partnering with municipalities and nonprofit interest groups to help guide their production.
Modular Building | Mar 3, 2023
Pallet Shelter is fighting homelessness, one person and modular pod at a time
Everett, Wash.-based Pallet Inc. helped the City of Burlington, Vt., turn a municipal parking lot into an emergency shelter community, complete with 30 modular “sleeping cabins” for the homeless.
Codes | Mar 2, 2023
Biden Administration’s proposed building materials rules increase domestic requirements
The Biden Administration’s proposal on building materials rules used on federal construction and federally funded state and local buildings would significantly boost the made-in-America mandate. In the past, products could qualify as domestically made if at least 55% of the value of their components were from the U.S.
Industry Research | Mar 2, 2023
Watch: Findings from Gensler's latest workplace survey of 2,000 office workers
Gensler's Janet Pogue McLaurin discusses the findings in the firm's 2022 Workplace Survey, based on responses from more than 2,000 workers in 10 industry sectors.
AEC Innovators | Mar 2, 2023
Turner Construction extends its ESG commitment to thwarting forced labor in its supply chain
Turner Construction joins a growing AEC industry movement, inspired by the Design for Freedom initiative, to eliminate forced labor and child labor from the production and distribution of building products.
Multifamily Housing | Mar 1, 2023
Multifamily construction startup Cassette takes a different approach to modular building
Prefabricated modular design and construction have made notable inroads into such sectors as industrial, residential, hospitality and, more recently, office and healthcare. But Dafna Kaplan thinks that what’s held back the modular building industry from even greater market penetration has been suppliers’ insistence that they do everything: design, manufacture, logistics, land prep, assembly, even onsite construction. Kaplan is CEO and Founder of Cassette, a Los Angeles-based modular building startup.
AEC Innovators | Feb 28, 2023
Meet the 'urban miner' who is rethinking how we deconstruct and reuse buildings
New Horizon Urban Mining, a demolition firm in the Netherlands, has hitched its business model to construction materials recycling. It's plan: deconstruct buildings and infrastructure and sell the building products for reuse in new construction. New Horizon and its Founder Michel Baars have been named 2023 AEC Innovators by Building Design+Construction editors.
Seismic Design | Feb 27, 2023
Turkey earthquakes provide lessons for California
Two recent deadly earthquakes in Turkey and Syria offer lessons regarding construction practices and codes for California. Lax building standards were blamed for much of the devastation, including well over 35,000 dead and countless building collapses.
Sports and Recreational Facilities | Feb 27, 2023
New 20,000-seat soccer stadium will anchor neighborhood development in Indianapolis
A new 20,000-seat soccer stadium for United Soccer League’s Indy Eleven will be the centerpiece of a major neighborhood development in Indianapolis. The development will transform the southwest quadrant of downtown Indianapolis by adding more than 600 apartments, 205,000 sf of office space, 197,000 sf for retail space and restaurants, parking garages, a hotel, and public plazas with green space.
Libraries | Feb 26, 2023
A $17 million public library in California replaces one that was damaged in a 2010 earthquake
California’s El Centro community, about two hours east of San Diego, recently opened a new $17 million public library. With design by Ferguson Pape Baldwin Architects and engineering services by Latitude 33 Planning & Engineering, the 19,811-sf building replaces the previous library, which was built in the early 1900s, damaged by a 7.2 earthquake that struck Baja California in 2010, and demolished in 2016.
