2006 global hotel transactions will significantly surpass the US$45 billion recorded in 2005, as reported by Jones Lang LaSalle Hotels and could even exceed US$60 billion - a 33% year on year increase.
Global CEO, Arthur de Haast, says “Last year global hotel transaction activity reached US$45 billion, representing a 67% increase on the year before. Anticipating a slight supply shortage we had expected to see similar levels to last year but we certainly did not expect to get close to 2005 levels in just 6 months!”
Global transaction activity to June 2006 has soared to US$41bn. Most of the activity is being driven by the US, however activity in all regions has increased significantly, with Europe and Asia Pacific expected to experience an even stronger second half. The activity is being driven by an abundance of capital seeking real estate, relatively inexpensive debt, the emergence of private equity firms as both dominant owners and now sellers of hotels, less attractive returns on offer from other real estate classes and continuing uncertainty in equity markets.
Arthur de Haast says, “In our latest research, the Hotel Investment Sentiment Survey, we have noted an increased appetite of owners to sell hotel assets which should see activity remaining strong. However, hotel ownership continues to attract more investors with prospective buyers out numbering potential sellers by nearly 3:1.”
He continues, “The survey also highlights that both initial yields and IRR expectations have been steadily declining since 2001, reflecting investors’ greater understanding and appetite for hotel transactions and their increased confidence in key emerging markets in Asia and Eastern Europe.”