Hotel transactions set for another record year

Jones Lang LaSalle Hotels has estimated that US$110 billion worth of global hotel transactions could be completed by the end of 2007. This represents a 52% rise on last year’s record-breaking figure of US$72.5bn, proving that investors’ appetite for the hotel sector remains at an unprecedented high level.

Arthur de Haast, Global CEO, Jones Lang LaSalle Hotels said, “Global hotel deal activity to June has already reached US$56bn, higher than we initially predicted for this period. Activity is particularly strong in the United States, where the market is largely being driven by REITs being taken private and private equity groups buying up not just real estate but also management and brands, as seen with Blackstone’s recent purchase of Hilton Hotels Corporation. However, there are fewer opportunities for deals on this scale so attention may turn to other regions, such as Europe, where private equity firms could still find value in buying large hotel businesses.”

Asia Pacific expects to see a significant jump in transactions to approximately US$9 billion, including the US$2.36 billion All Nippon Airways 13-hotels portfolio sale that Jones Lang LaSalle Hotels brokered earlier this year. This compares to the US$5.9 billion achieved in 2006, which in itself was a record level.

The latest edition of Jones Lang LaSalle Hotels’ Hotel Investor Sentiment Survey highlights investors’ ongoing enthusiasm for the hotel sector worldwide. It shows that globally buyers outnumber sellers by almost 4:1, and all three regions look set to remain markets in which sellers should be in control and can expect higher prices. The survey also shows that 23.4% of respondents are now expecting to build hotel assets, indicating that investors are being pushed to consider development due to the shortage of available investment stock.

Arthur de Haast added, “With continued confidence in trading performance we are expecting balanced growth going forward. Our survey results demonstrate that globally yields are still tightening although investors’ expectations for leveraged IRRs have increased slightly as interest rates continue to rise. The strength of the global economy, resulting in increased business and leisure travel, combined with the ongoing weight of capital and constrained supply will continue to create an attractive investment environment.”
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