Global Hotel Investment Projected to Reach $67B This Year

Chicago, IL— Global hotel investment volume will reach $67.2 billion, nearly equal to 2018’s total of $67.7 billion according to JLL’s Hotels & Hospitality’s annual 2019 Hotel Investment Outlook.

Even while anticipating some geopolitical uncertainty, hotel property performance remains strong and tourism and travel is anticipated to reach yet another record year with investors increasingly turning their attention to hotels.

According to the report, America’s transaction volume in 2019 will be primarily driven by high-profile resorts, upper-tier select service hotel portfolios plus asset and entity-level portfolio activity.

Luxury hotels are popular because they can broaden services to accommodate an increasing demand for experiential travel—a form of tourism where travelers focus on experiencing a destination through immersing in its people, culture and history. These hotels often feature more impactful design, a broader range of facilities and premium rates guests are prepared to pay for tours and programs.

Many luxury assets also cater to customers who may not have much time for leisure, but have the financial means, which creates opportunities for operators to offer even more additional services. As a result, JLL expects to see more targeted acquisitions of unique concepts and locations to complement existing product offerings.

“Unique concepts that I view as fresh and fun include Mama Shelter, Zoku, Selina and Virgin Hotel and Generator. All provide the opportunity to reinvent existing assets—they feature interesting design elements and smart repurposing of space,” says Mark Wynne Smith, Global CEO, JLL Hotels & Hospitality.

Economy Hotels

As for economy hotels, their numbers are thriving. Revenue per available room (RevPAR) for these assets continue to grow across the country and investment demand has been strong, particularly for portfolios. Newer select service brands also offer more design flexibility and as such, the hotel can more easily adapt to the local market.

“This allows operators to provide more curated, local market experiences and take advantage of the consumer trend towards experiential travel. There are some challenges—namely supply as select service product evolves and newer concepts get introduced, but overall, we anticipate these assets will perform well in 2019,” says Smith.

Global Hotel Investments

For the last five years, approximately 70% of global hotel investments were made by generalist investors who typically invest in multiple asset classes. Given hotels’ attractive yield profile, JLL expects investors will continue to seek entry into real estate, specifically hotels since they tend to trade at a risk premium compared to other asset types, due to their operational intensity. They also sit well in a portfolio of investments where other investment types may have rental streams but provide a lower capital return.

“With travel and tourism growing ahead of other metrics, the prospects are good for income growth higher than other sectors and investors want to be hooked in to this. As the current cycle has progressed, buy/fix/sell turnaround opportunities are somewhat reduced but they still exist, and these types of hotel investments can greatly boost portfolio return,” says Smith.

International Hotel Activity

The report further states that in 2018, the largest capital inflows targeted Europe, driven by Middle East and Asian investors. JLL anticipates international activity will increase in 2019.

Demand for new accommodation is increasing at a higher rate than the United States, which can be partially attributed to a slowing growth in international tourist arrivals. In all regions outside of the Americas, international tourist arrivals grew between 6%-10% in 2018, compared to 3% in the Americas.

Additionally, with land values and build costs generally in check, more projects are feasible and financeable. China, India and the Middle East are three locations where new supply is growing rapidly. Global operators are seeking to grow their footprints in these locations which is helping to drive new development, Smith tells GlobeSt.com.