JLL’s 2024 Global Hotel Investment Outlook has highlighted ‘remarkable resilience’ and growth of the hotel sector across Europe relative to 2019, as urban hotel performance soars.
Hotel performance soared across Europe in 2023, defying the broader economy, with revenue per available room (RevPAR) surpassing 2019 levels by almost 20%.
William Duffey, head of EMEA hotels and hospitality at the firm, said: ‘Last year was characterised by capital market dislocation and rising geopolitical tensions, however, despite this, the European lodging industry defied the broader economy. It demonstrated its resilience, reaching a full recovery and surpassing 2019 levels.'
2024 prediction
‘Looking ahead to 2024, we are optimistic about the European hotel industry. There is a consensus that the European Central Bank will begin to cut rates at some point in 2024, providing much needed clarity for investors. As a result, we expect hotel investment volumes to accelerate, likely exceeding 2023 by 15%, with urban markets such as London and Paris to attract the most investor interest. Investors who prioritise innovation and remain nimble will have the opportunity to acquire quality assets in the sector and grow their portfolio.’
With considerable dry powder, private equity remains the leading buyer of hotel assets worldwide. The year 2023 also witnessed what was described as a ‘remarkable rise’ in new investors joining the industry, as first-time European hotel buyers accounted for a record-breaking 41% of the region’s hotel investment volume for the year.
JLL Global Hotel Investment Outlook found that, despite the challenges of rising interest rates and escalating geopolitical tensions for the commercial real estate sector in 2023, hotel performance across Europe achieved a full recovery of RevPAR relative to 2019 levels.
Europe
Europe proved to be one of the most resilient markets globally, largely driven by growth in urban hotel performance.
According to data from STR, London RevPAR grew 19% relative to 2019, due to a surge in both inbound international and domestic European travel as tourists and investors alike took advantage of the weaker British Pound.
London’s occupancy, which still lags 2019 by 3% points, is expected to accelerate in 2024 driving both RevPAR and investment even higher –- the latter was down 64% from historical averages at just $867.8 mln in 2023.
A positive outlook can also be anticipated across Europe more broadly, as events like the Summer Olympics in Paris and Taylor Swift’s Era’s Tour drive international travel and an increase in urban hotel occupancy.
As a result, urban markets are proving to be one of the most appealing for hotel investment with 84% of hotel investors surveyed in JLL’s 2023 Hotel Investor Sentiment Survey expected to deploy the bulk of their capital towards urban markets over the next 12 months, with London being one of the most sought-after locations.
Cities like London, New York, and Tokyo have become attractive investment destinations.
Meanwhile, global hotel brands have evolved beyond a means of diversifying customer segmentation to now representing a hotel's value for travelers, operators, and investors.
Hotels are integrating into various aspects of consumerism by selling retail products online, creating new revenue streams, and fostering customer loyalty. They are also expanding into non-traditional areas such as residences, private member clubs, and yachts to capture the entire travel journey and solidify customer loyalty.
JLL believes this expansion presents investment and innovation opportunities, but investors should carefully consider brand choices as they are buying into an entire ecosystem. ‘As global hotel development slows, look for brand acquisitions to drive shareholder value. Brand consolidation may also occur as traditional brands enter new verticals, and partnerships will be formed to leverage expertise and create shared customer equity.’
Consumers are increasingly making buying decisions that align with their personal values, with sustainability chief among them.
While consumers have been slower to demonstrate a willingness to pay more for sustainable travel experiences, this has begun to change as the industry adopts standardized practices for hotels to communicate their sustainability commitments to travelers during the buying process. This has led to growing opportunities for green hotel investments and a rise in green financing options, which has allowed investors to unlock new sources of capital in an otherwise turbulent capital market environment. The rise of sustainable infrastructure and a focus on responsible and regenerative tourism will shape the industry, with hotels investing in initiatives that prioritize the well-being of local communities and the environment.
JLL believes there is an optimistic outlook for the global hotel industry in 2024. ‘As consumers continue to spend on travel above all else, hotel performance will accelerate further with urban markets likely to lead the charge. Brands that prioritize sustainability, wellness, and authenticity will have an advantage. As capital market conditions improve, most investors expect to be net-buyers over the next 12 months, with cities like London, New York, and Tokyo likely to be the largest recipients of capital. Overall, the report forecasts positive RevPAR growth and opportunities for increased global hotel investment in the coming year. Global hotel investment volume will accelerate in 2024, exceeding the previous year by 15% to 25%.’
Earlier this week, it emerged a Korean fund had acquired the Hotel Dame Des Arts in Paris.
