JLL report reveals key global trends across hotel markets

Investor sentiment for hotel product remains cautiously optimistic, as investors navigate international, political and economic dynamics in addition to the recent coronavirus outbreak in China. According to JLL Hotels & Hospitality’s annual Hotel Investment Outlook (“HIO”), a forward-looking, global analysis of trends affecting the hotel investment market, global hotel transaction activity will be shaped by record levels of real estate fund-raising and interest from new buyers.

Global hotel transaction volumes in 2019 reached US$66 billion, bolstered by a resilient global economy and continued demand from domestic and international travelers. However, the length of the current market cycle, trade conflict and ongoing uncertainty surrounding Brexit gave investors cause to feel more cautious, which led to a 6 percent decrease in total hotel market liquidity compared with 2018. In 2020, global hotel liquidity is expected to decrease approximately 10-15 percent as investors adopt a slightly more selective approach. Yet, the pipeline in deal flow activity will continue across all regions through 2020.

Generalists and International Investors Driving Volume

This year, two buyer groups are expected to account for the lion’s share of hotel investment activity.

Generalist investors who invest in multiple asset classes will continue to be the largest hotel investor group due to their mandate to deploy capital.  Generalist investors now take part in 70 percent of investment volume in 2019 versus nearly 60 percent a decade ago. Additionally, international capital will be a key provider of global liquidity, with capital outflow volume expected to rise across North America, Europe and Asia.

A remarkable year for Asia Pacific

Hotel transaction volumes in Asia Pacific rose by 44 percent in 2019, relative to 2018, exceeding previous projections of a 25-30 percent increase. This marks the second time that regional hotel transactions surpassed the US$12 billion mark. The region’s remarkable performance was supported by several high profile deals in South Korea, Singapore, and Australia.

However, deal value in 2020 in Asia Pacific is expected to decrease year-on-year, a reflection of both the notable amount of large ticket size transactions in 2019 and an anticipation of moderate investment activity in the first half of 2020 due to the ongoing impact of the novel coronavirus and consequently investors’ wait-and-see approach.

JLL’s report also outlines three key global trends to watch for in 2020:

The rise of affordable lifestyle hotels. Changing guest demands and increased competition from the alternative accommodation space have fueled hotel parent companies’ interest in smaller, more technology-focused hotels located in urban areas. Over the past five years, the affordable lifestyle brand sector has seen the total global number of rooms more than double.

The emergence of first-time hotel buyers. Investors new to commercial real estate, as well as those with experience in other commercial real estate property sectors, are increasingly turning toward hotels in search of higher yield and diversification.

The increase of the hospitality operating model. As real estate owners and landlords acknowledge that their end-users – whether hotel guests, retailers or corporate occupiers – expect a certain level of service and a memorable experience, more real estate products with hospitality elements will proliferate, such as hotels offering co-working spaces.

Download JLL’s Hotel investment Outlook: https://www.jll.co.th/en/trends-and-insights/research/hotel-investment-outlook-2020