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News Release

Hotels: the answer to the hunt for yield?

A snapshot of the EMEA hotel market for IHIF 2017


​IHIF, 6 March 2017 - For investors looking for good yield returns, hotel assets offer the perfect answer, achieving higher yields than more mainstream property assets including offices, warehouses or retail according to JLL.

Key European capitals such as London and Paris will continue to offer deep and liquid markets given their popularity as business and leisure resorts and JLL predicts that Europe will see the most significant improvement of all global regions in 2017. The Spanish, Irish, Portugese and German markets are expected to be particularly active.

Across the Europe, Middle East and Africa region, there is expected to be growth in volumes from approximately $20.5 billion in 2016 to $22.5 billion in 2017. Last year, transaction volumes by institutional investors secured 20% of market share, four times the proportion seen in 2015. Institutional investors’ buyer share is expected to stay strong in 2017, with an increase in private equity buyers also expected.

The strength of Germany’s economy means that it is a safe haven when it comes to investment in the hotel sector. While Berlin and Munich are the standout performers other cities including Hamburg, Frankfurt, Cologne, Dusseldorf and Stuttgart are also worth consideration due to reliable business demand from conferences and industry. On average, they offer yields ranging between 5% and 6% depending on asset quality, tenant and location which represents a substantial return in the current market.

Spain’s hotel market is also growing following fallow years post economic crash. With a growth rate of 3-4% GDP compared to 1% and 2.2% on France and the UK respectively, the country is attracting more business visits and the native population is getting richer. Madrid made it into the top ten list of city destinations that investors are most positive about globally for hotel operating performance according to JLL’s recent Hotel Investor Sentiment Survey.

While Airbnb is a disruption to the traditional operator model, JLL believe it is also a spur for more hospitality brands to diversify their portfolios to capture a share in the emerging serviced apartment and aparthotel market.

Philip Ward, EMEA CEO of JLL Hotels & Hospitality Group, commented: “Major economies scheduled to hold elections in 2017 include Germany, France and the Netherlands. As the outcome of these is determined throughout the year, we expect investment volumes to gradually intensify. Hotel owners’ expectations have reset and there’s an increasing proportion who want to sell now, as many markets are still expected to see a sharpening of yields, as opposed to waiting for one or two more years when hotel performance might plateau.”