Hotel investment remains attractive

Global Market Perspective, August 2019

Investors are targeting asset classes with higher income growth and yield potential, resulting in a notable increase in investment activities in the wider 'Beds' sector, including hotels, student accommodation, healthcare and residential. However, a lower number of large transactions during the first half of 2019 resulted in global hotel transaction volumes totalling US$24.6 billion, 18% lower than the same time last year. Activity in EMEA and Asia Pacific continued to be broadly level with 2018 while a lack of portfolio opportunities contributed to a 30% fall in the U.S.

Cross-border investors target Europe

In EMEA, hotel transaction volumes were largely at the same level as last year at US$9.3 billion. Europe saw the highest inflows from cross-border investors of any region with a total of US$1.8 billion worth of transactions from cross-border capital during the first half, notably from investors based in North America and the Middle East. The UK, Italy and Germany were the top investment hotspots, together accounting for 61% of cross-border activities. Investment location diversification and positive tourism growth are two of the key reasons for international investors choosing Europe.

The U.S. registered a 28% decline in transaction volumes over the first six months of 2019. This was largely due to the lack of portfolio opportunities in the market, with single-asset transaction volumes consistent with last year’s level. The outlook for the U.S. remains positive and activity is expected to pick up in the second half of the year, with a number of high-profile deals closing in the next few months.

Investment activity in Asia Pacific remained largely on par with the first half of 2018, with year-to-date transaction volumes totalling US$4.5 billion. Japan's hotel market continues to capture strong investor interest and recorded the highest regional transaction volumes in the first half of the year with demand driven by future large-scale events such as the 2019 Rugby World Cup, 2020 Tokyo Olympics and the 2025 World Expo. China emerged as the second most liquid regional market, accounting for 25% of hotels volumes in Asia Pacific.