EMEA hotel transactions drop 4% in 2012

Hotel investment activity fell 4% in 2012 to €8.5 bn, according to new figures published by Jones Lang LaSalle.

The most liquid market was once again the UK with transaction volumes of €2.3 bn followed by France at €1.7 bn and Germany at €1.2 bn.

Paris and London were a magnet for foreign capital, primarily for cash-rich investors from the Middle and Far East regions accounting for roughly 40-50% of total transaction volumes in these respective countries.

The most dominant buyers of hotel real estate were institutional investors, who increased their market share from 17% of the entire investment value in 2011 to 24% in 2012. These risk-averse investors, often in the form of pooled funds, were very active in Germany. Their focus was primarily concentrated on assets in core markets subject to stable leases.

'Stable volumes reflected continued investor confidence in hotel real estate, which remained an attractive asset class particularly for a growing number of overseas investors,' said Jonathan Hubbard, CEO Northern Europe JLL Hotels & Hospitality. 'International buyers from the Middle East and Asia, often in the form of large pension funds, sovereign wealth funds and private individuals, have in many cases started to replace the more traditional sources of capital.'

The UK market has recently seen the largest deal since the financial crisis of 2007/2008 with the sale of the 42 strong UK Marriott portfolio. 'This market confidence looks set to continue with the sale of the Principal Hayley Group in the UK,' Hubbard added.

Investor confidence was backed by resilient operating results in a number of key markets. This was especially the case in Paris (+8.5%) and Germany where strong growth in Revenue Per Available Room (RevPAR) was seen in Berlin (+8.6%), Frankfurt (+5.1%) and Munich (+8.5%).

Further growth in trading performance is expected in a number of European markets in 2013 as worldwide travel continues to expand and JLL anticipates a continued increase in foreign arrivals into Europe from emerging economies in Asia and South America.