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Hotel investment vehicles continue strong run as economy recovers
MEXICO CITY, March 31, 2014 — The Caribbean-like beaches, desert vistas and mountain ranges in Mexico have earned the country a top spot among the 15 most-visited destinations worldwide, drawing more than 23 million visitors a year. Strong tourist demand and budding economic and political environments are creating a positive outlook for the lodging sector, driving institutional investment into the region.
“We expect the Mexican lodging sector to continue its positive trajectory this year and throughout the next several years,” said Clay Dickinson, Executive Vice President of JLL’s Hotels & Hospitality Group advisory practice in the Latin America region. “Hotel transaction volumes are projected to reach US $700 million this year, the highest level in ten years. New construction is also on the rise with more than 191,600 new rooms expected to deliver before 2022.”
From a low of less than US $100 million in hotel trades in 2009, transactions in 2013 topped US $600 million as investors bet big on the Mexico hospitality sector. Despite the new development activity, investors feel steady performance growth has resurged investment prospect. JLL expects deal flow to rise 15 percent in 2014 to the second-highest annual level on record of more than US $700 million in hotel transactions.
Newly formed investment vehicles such as FIBRAs and CKDs, which accounted for 25 percent and 50 percent of hotel acquisition volume in 2012 and 2013 respectively, fueled local investment activity. These newcomers to the market quickly ratcheted up to half of the hotel transaction volumes in the country.
“Mexican authorities are increasingly promoting the country in other important source markets like Europe, Latin America and Asia, including the largest potential market – China,” said Fernando Garcia-Chacon, Executive Vice President of JLL’s Hotels & Hospitality Group and leader of the advisory group in Mexico. “The country’s increasing middle-class population, with its expanding purchasing power will continue to drive room demand and investor activity forward.”
In addition to an uptick in investment activity, construction is also expected to increase throughout the next decade by a compound annual growth rate in room supply of 4.9 percent. This projected change would be more than three times the growth rate expected for the United States.
Find out more about the increasing demand for hotel rooms across all of Latin America in a video summary: http://www.youtube.com/watch?v=f8BHU2R1RNU
“Our bullish expectations for growth in hotel stock is based on two key factors – the country’s shift to a more service-oriented economy due to the emerging middle class, and its significant investments in infrastructure and large-scale projects, which is currently estimated at US$134 billion.,” said Garcia-Chacon.
“With more than ten years of experience in the hotel investment industry, and as a Mexican, I am excited to see all of the change and progress coming to the hotel and hospitality industry in my country,” added Alfonso de Gortari. Recently hired in Mexico City, de Gortari serves as a Senior Vice President with JLL’s Hotels & Hospitality Group, and offers strategic advisory expertise and strong local market knowledge to expand the company’s presence in the market.
JLL’s white paper analysis “Economic Transformation Drives Latin America’s Lodging Industry,” was prepared with the support of industry partners including Wyndham Hotel Group, DLA Piper, VOA Associates and RCI, Inc. More information on this and other Latin America reports can be found here: http://www.jll.com/hospitality-latam.
JLL’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 300 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 $36 billion, while also completing approximately 4,000 advisory, valuation and asset management 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 iPhone app or iPad app from the App Store.
About JLL JLL (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 $4 billion, JLL operates in 75 countries worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3 billion square feet and completed $99 billion in sales, acquisitions and finance transactions in 2013. Its investment management business, LaSalle Investment Management, has $47.6 billion of real estate assets under management. For further information, visit www.jll.com.
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