'Hopes of stronger income growth drive improved hotel sentiment'

Confidence in the EMEA hotel investment market continues to build with investors anticipating trading fundamentals will stabilise or improve over the next six months according to the latest Hotel Investor Sentiment Survey (HISS) by Jones Lang LaSalle Hotels.

The HISS report also highlights that good growth prospects over the next two years are expected for the majority of cities. Short term performance expectations were most positive across Western Europe, while those for Eastern Europe and MENA remained more fragile. In particular cities in Scandinavia and Germany are expected to show a substantial improvement in the short term.

Mark Wynne-Smith, CEO of Jones Lang LaSalle Hotels in EMEA, said: 'This optimistic short term view has been driven by the positive occupancy results achieved across the majority of EMEA markets this year. The gradual move out of the recession and rising business confidence has also supported the return of hotel investment activity in EMEA, fuelled by motivated sellers bringing more stock to the market.'

In line with the upturn in the EMEA hotel investment market, average yield requirements strengthened in the latest survey to 7.7%% from 8.0% in April 2010. Yield requirements were lowest in Western Europe, with the average yield for German cities standing at 6.8% and London realising requirements below 7%. Yield requirements also substantially strengthened across Eastern European cities, reaching an average of 8.2%, 100 basis points down since April 2010.

Wynne-Smith continued: 'Investors do not expect the hardening of yield requirements to continue over the next six months. There is the potential for a greater number of assets to be put up for sale as banks take advantage of improving market conditions which could negatively impact investor pricing, in particular for assets outside core city locations.'