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Hotel investment in Europe, Middle East and Africa falls

21 January 2010 by

The hotel investment volume in Europe, Middle East and Africa (EMEA) fell to €2.9b (£2.5b) in 2009, reflecting the lowest volume of transactions since the late 1990s and a drop of 63% compared with 2008, according to global hotel investments services firm Jones Lang LaSalle Hotels.

While 2010 is expected to remain challenging, by the end of the year improving economic conditions, strengthening of investor confidence and an increase in stock on the market could increase investment volumes by almost 40%, compared with 2009, and reach £3.5b.

"The EMEA hotel market will continue to be difficult in 2010, albeit with some important signs of improvement," said Mark Wynne-Smith, chief executive officer, Jones Lang LaSalle Hotels, EMEA. "Transaction activity will be characterised by two types of investors, opportunistic buyers and secure income buyers.

"The former will be most apparent in the markets most severely impacted during 2009, including the UK, Spain and Ireland. The latter group will mainly constitute institutional investors, searching for properties with a solid income and sound covenants."

The majority of hotel investment activity during 2009 was recorded on continental Europe, with France taking the lead. The strongest demand was apparent for key gateway cities such as London and Paris.

The UK, normally the leading market in terms of volume, was ranked in second place as investment activity in the regions came to a virtual standstill and was followed closely by Germany and Spain. However, during 2010 the UK is expected to once again become the leading country in terms of volume, moving back towards a 30-40% share of investment into EMEA.

As lending capacity reached record lows in 2009, single asset transactions became the prominent type of deal in the hotel market accounting for 72% of total volumes, and portfolio activity falling by almost 80% compared with 2008.

The number of distressed hotel assets on the market is expected to slightly increase in 2010. Although many owners have faced refinancing challenges in 2009, distressed hotel sales have not been widespread.

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By Janet Harmer

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