The hotel market in EMEA is perceived to be firmly on a path to recovery according to Jones Lang LaSalle Hotels' latest Hotel Investor Sentiment Survey.
Improved market conditions have prompted investors to explore hotel investment opportunities, particularly throughout Western Europe. Only the Middle East and North Africa (MENA) reported negative short-term expectations, driven by political difficulties.
Mark Wynne-Smith, CEO of Jones Lang LaSalle Hotels in EMEA, said: "Trading performance across the EMEA hotel market has strengthened substantially over the past six months. Germany has taken the lead in EMEA on medium term performance expectations with Munich and Hamburg noting the strongest expectations. In the UK, the majority of growth is driven by London. While expectations for UK regional cities are currently subdued, investors expressed a more pronounced improvement over the next two years, with the top performer expected to be Edinburgh."
Only a few cities in Europe are anticipated to face further hardship, the majority of which are located in Eastern Europe. Nevertheless, overall trading performance expectations for Eastern Europe improved notably compared to the last survey in October 2010, driven by Istanbul, Moscow and Warsaw, while results for MENA were more diverse. On a city level, strongest growth in the medium term is anticipated for London, Paris, Istanbul, Rome and Munich.
Wynne-Smith continued: "Tourism in Istanbul, Moscow and Warsaw has expanded rapidly in recent years, encouraging international branded operators and investors to find a foothold in the market to benefit from the market's growth potential.
"Across MENA the hotel market in some cities is currently suffering from political unrest while others continue to struggle with oversupply in a weak, albeit recovering, tourism market. The key gateway cities remain consistently resilient, and investors' yield requirements have hardened by a further by 40 basis points over the past six months as investors remain confident that these markets will continue to provide income growth."
Wynne-Smith continued: "While a level of cautiousness remains, buy intentions have once again become the key sentiment in investor's minds and this reflects the strong investment appetite during Q1 with EMEA investment volumes increasing 160 percent compared to Q1 2010."
Key markets that will continue to be targeted include Madrid, Rome, London, and Paris, with Stockholm and Copenhagen set to benefit from rising corporate spend. Asset preference in these markets is focused on upscale and mid-scale hotels, while luxury assets are favored in MENA and Eastern Europe.
Improving market conditions and growing investor confidence have resulted in a more favorable position for sellers in the Western European market. The survey has shown that there is a significantly higher number of buyers to each seller for markets such as London and Paris but this trend does weaken markedly for the secondly cities. During the remainder of 2011 as confidence continues to rebound, Jones Lang LaSalle Hotels expects to see a move towards secondary locations or outside of Western Europe in search of improved total returns.
Wynne Smith concluded: "All the signs are that investors will be seeing more hotels being offered for sale in the second half of this year as sellers take advantage of the improved market conditions."
Source: Jones Lang LaSalle
