Hotels will remain attractive to investors despite current global economic conditions, industry analyst Jones Lang LaSalle Hotels says.
In its recent Hotel Investment Outlook 2008 report, Jones Lang LaSalle says £56.7bn-worth of hotels changed ownership despite the economic slowdown in the second part of 2007.
Although business travel spending is showing signs of decline, the firm expects the industry to be bolstered by the growing leisure market, giving hotels the edge over other property sectors.
Jones Lang La Salle Hotels CEO Middle East and Africa Mark Wynne-Smith says there will be more activity in both transactions and development in the Middle East and Central and Eastern Europe – particularly in Russia.
Wynne-Smith says Turkey, Tunisia, Algeria and Morocco all have ambitious tourism development plans.
“These markets have benefited from tourists’ desire to try something new, a trend that will make it harder for traditional markets such as Spain to compete,” he says.
“Likewise, Russia is a developing market with a large number of projects in the pipeline; meanwhile the market is heavily undersupplied allowing some hotels to achieve premium rates.”
Wynne-Smith says there is a different dynamic at play in the hotel investment sector compared to other investments, so although activity will slow, global conditions will have less of an impact than other property sectors.
“The general M&A (merger and acquisition) market is reported to have slowed down around 40 percent following the sub-prime crisis, whereas hotel transaction activity has slowed just 17 percent compared to the same period in 2006.”
By Elizabeth Clifford-Marsh