Global ho­tels mar­ket over­view by Philip Ward, JLL

Hospitality News Middle East - - CONTENTS -

While un­cer­tainty con­tin­ues in 2017, with elec­tions in UK and Ger­many, on­go­ing Brexit ne­go­ti­a­tions and U.S. in­ter­est rate in­creases, the out­look for the travel and tourism in­dus­try is pos­i­tive, with fore­casts for higher growth at al­most four per­cent (in terms of di­rect GDP). The in­dus­try also ap­pears to have a greater abil­ity to ab­sorb un­cer­tainty than in the re­cent past. This op­ti­mism is sup­ported by en­cour­ag­ing ho­tel op­er­at­ing per­for­mance at the start of 2017. All three re­gions achieved an­nual rev­enue per avail­able room (REVPAR) growth over the Fe­bru­ary 2017 year-to-date pe­riod, with Asia Pa­cific post­ing the high­est up­lift of al­most three per­cent (2.9 per­cent), while the Amer­i­cas saw a two per­cent in­crease and Europe re­mained rel­a­tively static, with a min­i­mal one per­cent rise.

Trans­ac­tion vol­umes to pick up

The in­ter­na­tional ho­tel in­vest­ment mar­ket ended Q1 on a cau­tious note, with trans­ac­tion vol­umes clos­ing the quar­ter at USD 11 bil­lion, down five per­cent year-onyear (y-o-y). Asia Pa­cific posted the largest growth, at seven per­cent, thanks to strong deal flow in Hong Kong, which got off to a quick start in 2017, with five sin­gle-as­set trans­ac­tions worth a com­bined USD 940 mil­lion. The Amer­i­cas grew by four per­cent to al­most USD 6 bil­lion, with a 392 per­cent in­crease in trans­ac­tion vol­umes in Canada over the same pe­riod in 2016, off­set­ting an 18 per­cent de­crease in the US. Q1 vol­umes in EMEA fell 20 per­cent y-o-y to USD 3.6 bil­lion, as in­vestors adopted a con­ser­va­tive ap­proach due to the heavy elec­tion year. The drop came de­spite Ger­many reg­is­ter­ing a 26 per­cent an­nual up­lift in vol­umes to USD 1 bil­lion. In­vestor in­ter­est re­mains high, how­ever and ac­tiv­ity is ex­pected to pick up in the lat­ter part of the year.

Top global mar­kets

The United States con­tin­ues to be the top mar­ket for trans­ac­tion ac­tiv­ity, although vol­umes, which to­taled USD 4.5 bil­lion in Q1 2017, were 18 per­cent lower than the same quar­ter last year. Pos­i­tive fac­tors, which will have more bear­ing as the year ad­vances in­clude the re­turn to mar­ket of the do­mes­tic real es­tate in­vest­ment trusts (REITS), an abun­dance of eq­uity and healthy debt cap­i­tal mar­kets. Pub­lic REITS ac­counted for 25 per­cent of ac­qui­si­tions by vol­ume in the quar­ter, com­pared to 10 per­cent in Q1 2016. Ger­many sat firmly in sec­ond place in Q1, re­port­ing a 26 per­cent y-o-y up­lift in deal vol­umes to USD 1 bil­lion, of which 75 per­cent were sin­gle-as­set sales. Ham­burg, Ber­lin and Mu­nich were the top three in­vest­ment hotspots, each reg­is­ter­ing deal vol­umes of over USD 100 mil­lion. Do­mes­tic in­vestors dom­i­nated the mar­ket, ac­count­ing for around 90 per­cent of to­tal vol­umes. A num­ber of prop­er­ties traded in Q1 are still un­der con­struc­tion, demon­strat­ing in­vestor con­fi­dence in the fu­ture of Ger­many’s econ­omy. Hong Kong and Canada joined the top league in Q1 2017. Hong Kong has not had any ma­jor in­vest­ment ac­tiv­ity af­ter the USD 1 bil­lion sale of In­ter­con­ti­nen­tal Hong Kong in 2015, but got off to a quick start in 2017, with five sin­gle-as­set trans­ac­tions worth a com­bined USD 940 mil­lion. Buy­ers were mostly do­mes­tic, with one main­land Chi­nese in­vestor. Asian in­vestors dom­i­nated the Cana­dian ho­tel in­vest­ment mar­ket in Q1 2017, which re­ported a to­tal deal vol­ume of USD 870 mil­lion. The Cana­dian travel and tourism in­dus­try has been boom­ing re­cently and the num­ber of overnight trav­el­ers is fore­cast to grow three per­cent in 2017, sup­ported by the fa­vor­able Cana­dian cur­rency com­pared to the US dol­lar. The UK re­ported a to­tal of USD 818 mil­lion in ho­tel in­vest­ment in Q1 2017, down 26 per­cent on the same pe­riod last year. Lon­don is still the cen­ter of at­ten­tion, ac­count­ing for over 80 per­cent of trans­ac­tions, de­spite stock be­ing tightly held. The UK con­tin­ues to ap­peal to in­vestors from both home and abroad, with North Amer­i­can in­vestors the most prom­i­nent source of over­seas cap­i­tal. The UK has ben­e­fited from a weaker cur­rency and re­ceived 16 per­cent more in­ter­na­tional vis­i­tors y-o-y in the three months to Jan­uary 2017.

The global hos­pi­tal­ity scene has wit­nessed ups and downs through­out the past year.

Philip Ward, CEO Ho­tels & Hos­pi­tal­ity, EMEA at JLL, con­sid­ers the im­pact from a re­gional per­spec­tive

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