Strong levels of cross-border investment into the European hotel market - which reached $4.9 bn (€4.32 bn) in 2018 - will continue in 2019, according to new research from JLL.
JLL's Hotel Investment Outlook 2019 projects that overall investment volumes across Europe, the Middle East and Africa, are expected to soften to $21.2 bn from $22.9 bn in 2018.
However, despite political uncertainty, tourism and business fundamentals remain solid thanks to strong infrastructure developments in the region, which will continue to attract international investors towards strong assets and opportunities in these markets.
'Political uncertainty and the volatility in equity markets will test investors’ sentiment throughout the year. However, we expect hotel investment volumes to hold steady on 2018 levels owing to hotels’ attractive yield profile compared to other sectors,' said Philip Ward, EMEA CEO, JLL hotels & hospitality group.
The report predicts that the hotel market will be driven mostly by single-asset deals, with portfolio trades expected to reduce, given the significant volumes of transaction of this type seen over the past two years.
In the meantime, new investors are emerging. Diverse sources of core and core-plus capital are increasingly considering investment in the hotel market, JLL said. Private equity groups and other yield-driven investors face more competition from investors with a lower cost of capital and are expected to continue to move into secondary markets such as Portugal and Italy.
Germany and the UK account for nearly 60% of pipeline rooms currently under construction and are expected to absorb additional supply in the medium term due to strong tourism growth forecasts.
