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News Release

London

London expected to benefit from uptick in hotel investment volumes according to JLL


London, 1 February 2017 - London is expected to see an increase in hotel investment as volumes into the sector are expected to rise from $20.5 billion dollars in 2016 to $22-£23 billion in 2017 across the Europe and Middle East region.

JLL’s latest Hotel Investor Outlook report highlights that while investment interest in the UK hotel market was predominantly domestic in 2016 following market uncertainty post the EU referendum, this is expected to change in 2017. London will continue to benefit from Chinese capital which continues to look for trophy assets in the pre-eminent global markets.
The report highlights big shifts when it came to who the most active hotel buyers were in the market in 2016. Private equity investors deployed a significantly reduced amount of money through the year, making way for institutional investors which saw the largest uplift in buying activity. Transaction volumes by institutional investors made up 20% of market share, four times the proportion seen in 2015. Institutional investors are expected to remain key players in the UK and wider EMEA market while private equity buyers stand to see some increases but no major jump.

With revenue per available room growth slowing across mature markets, further consolidation and M&A activity is expected across the sector as brands and management companies look to boost performance and garner efficiencies by adding properties.

JLL predicts that home sharing sites will start to focus more of their attention on providing services for business travellers. However, the firm calculates that home rental sites and the alternative accommodation markets still only account for 10% of hotel room bookings in the top global gateway markets of New York, London and Paris. The research also shows that while they have notable room for growth, the number of room nights accommodated by such platforms is already plateauing in urban gateway markets. It also highlights that demand for alternative accommodation tends to take share from lower tier and budget hotels and that between 30 and 50% of demand is induced to market. This means that they would not have made the trip had it not been for the lower priced option.

Philip Ward, EMEA CEO of JLL’s Hotels & Hospitality Group, commented: “Despite geo-political issues, terrorism, and economic volatility, the tourism industry has shown resilience and travel remains on the increase. While London remains in the top spot of desired investment destinations, the lack of available product for sale and the gap between buyer and seller expectations has drawn investors to key regional markets and this is evident through the significant increase in transaction activity in Birmingham and Manchester.”

The full Hotel Investment Outlook 2017 can be downloaded here.