Hotel investment in Europe, the Middle East and Africa (EMEA) more than doubled in 2010 to £6.5b, up from £2.5b, according to the Hotel Investment Highlights report by Jones Lang LaSalle Hotels.
Mark Wynne-Smith, chief executive of Jones Lang LaSalle Hotels, EMEA, said that last year marked the turning point for the EMEA hotel market, as corporate travel began to recover and investor confidence strengthened.
"The year started off revitalised with a 36% increase in investment volume in Q1 year-on-year and continued to accelerate through the course of 2010," he said.
This year now expects to see the hotel market build upon the strong market dynamics of 2010, although the structure of the market is likely to change substantially with a growing number of secondary assets becoming available in place of trophy assets.
"The UK, Spain and Ireland are expected to generate the bulk of this activity," said Wynne-Smith.
The key trends of 2010 highlighted in the report include:
• Improved occupancy and average room rates. Although room yield across Europe increased by an average of nearly 10%, in almost all markets they remained below the peak levels of 2007. Only London, Frankfurt and Munich were the exceptions to this rule.
• Lack of new financing resulted in deal sizes remaining small. Just over 70% of all transactions had a purchase price below £42m, while only seven deals were recorded with a price tag above £170m.
• The majority of investors were focused on gateway cities, with London and Paris as firm favourites. Across the UK, investment volumes reached £2b, compared to only £42m in 2009, with London accounting for over 80% of business.
• The availability of trophy assets in 2010 attracted a number of international buyers. While the majority of transactions were funded by European or domestic capital, Asian finance more than doubled, accounting for 12% of investment.
• Trading performance is forecast to strengthen further in 2011, but the pace of recovery may slow down later in the year. The first quarter is likely to show strong year-on-year growth, which will continue into Q2, adversely affected by the ash cloud in 2010. Growth is likely to be driven by an increase in occupancy as travellers continue to focus on cutting costs.
By Janet Harmer
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