Global Market Perspective, February 2019
Hotels

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Strong tourism outlook and opportunity for yield drives investors to hotel real estate

Global hotel investment volumes largely held steady in 2018 at US$67.7 billion, as increasing numbers of non-traditional hotel investors continued to expand into the sector. The investment story for hotels remains strong due to the positive growth in tourist arrivals and the revenue per available room (RevPAR) outlook. At the same time, there are now more vehicles which enable investors to enter the hotel real estate market through routes other than making direct acquisitions of physical assets, for example, through debt lending or M&A activities, which are both increasing.

The U.S. heads global hotel investment activity

The U.S. delivered outstanding results, with a 42% year-on-year surge in transaction activity driven by portfolio deals across multiple segments of the market. Luxury hotels and resorts are gaining buyers’ attention, with annual sales up 76% and 40% respectively. This segment is benefiting from the latest trend of experiential travel where customers are increasingly willing to spend money on luxury travel experiences.

In EMEA, hotel transaction levels decreased to US$22.9 billion, from US$24.7 billion in 2017. The UK took top spot in the region with investment volumes up 23% on an annual basis, while Germany and France in the second and third places also saw uplifts of 17% and 40% respectively. Cross-border capital continues to play a key role in the hotel investment market with Europe attracting the largest amount of international investment as Middle Eastern and Asian buyers were active in the region.

In Asia Pacific, US$1.6 billion worth of hotel properties was traded in the last quarter of 2018, bringing the annual total to US$8.3 billion. Single-asset transactions continue to drive the market, making up 84% of the total volumes in 2018. Japan was the region’s most liquid market, with investment momentum expected to continue to build due to the forthcoming Rugby World Cup in September 2019 and the Tokyo Olympic Games in 2020. China came in second place regionally, recording the top three hotel transactions in Asia Pacific over the year.