$34 billion in hotel investment forecast for 2011

Jones Lang LaSalle Hotels released its second quarter analysis of the global hotel investment market on Wednesday showing that US$14.8 billion in hotel assets was traded in the first six months of this year.

Compared with the same period last year, the represents a 117% increase caused by easing levels of liquidity, improved hotel trading performance and bank’s actions to speed up workout programs, Jones Lang LaSalle Hotels says. The largest regional increase was in North America, which saw a 187% upsurge.

A total of US$4.7 billion in hotel transactions took place in Europe, Middle East and Africa (EMEA) in the first half of 2011, marking an 84% increase on the same period last year. Activity accelerated as a result of a marked increase in the number of assets going into administration. In Asia Pacific, deal volume totalled US$2.6 billion, a 59% increase on the prior-year period.

JLLH expects hotel investment volumes across EMEA to rise to US$15.1 billion, a US$2 billion increase on our previous forecast, as significant product is expected to come to market in the second half of 2011.

In Australasia, deal volume totalled US$478 million with offshore capital sources featuring strongly in the country, accounting for 76% of transaction volumes. JLLH expects transaction volumes to reach US$1 billion in Australasia by year-end 2011, which is up from our previous forecast of US$800 million with cross border investment expected to continue,

“Despite various natural, economic and political crises witnessed globally in the first few months of 2011, hotel transactions continued gaining momentum and volumes for the full year are expected to exceed our previous forecast,” Arthur de Haast, Jones Lang LaSalle Hotels CEO said. “We anticipate full year numbers to reach US$34.8 billion globally, marking a 28% year-on-year increase.”

The reason for the disparity in percentages between the first part of 2011 (117%) and the projection for the entire year (28%) is due to the fact that the volumes are being compared to a low basis. In the first half of 2010, transaction volumes were still bouncing along the bottom. At this time, hotel fundamentals were still declining in many markets across the globe, which hampered investor activity. In the U.S., hotel RevPAR declined in the first four months of 2010. Across the globe, hotel trades in terms of transaction volume picked up much more substantially in the second half of 2010.