The European hotel investment market has proved that it is as strong as ever with transaction volumes reaching €9 billion at the half year mark, compared to €9.3 billion in the first half of 2006.Portfolio transactions represented 72% of total investment at €6.5 billion, and high net-worth individuals (HNWIs) have surpassed private equity players as the dominant investor group in European hotels.
Mark Wynne-Smith, European CEO, Jones Lang LaSalle Hotels said: “We have seen a marked decrease in the number of private equity buyers this year; they currently have a market share of 23%, down on last year’s figure of 43%. Private equity investors generally have shorter investment horizons and are therefore more sensitive to increases in the cost of borrowing. High net-worth individuals on the other hand have been the dominant investment force so far this year – they account for over one third of all hotel purchases, over four times the amount at the same period last year.”
“In addition, institutional investors have become increasingly active buyers this year raising their market share to 17% in the first six months compared to 5% in 2006.”
Whilst private equity investors remained active buyers in the European hotel market, they also became the dominant vendors, disposing of eight times the volume of hotels during the first half of 2007, compared to first half 2006.They accounted for almost one third of all sales, whilst hotel operators still accounted for over half of total sales.
Mark Wynne-Smith continued: “Intra-European* investment reached a record high of 43% of the total deal activity for the first half of 2007.Increasing transparency is spurring on cross-border investors to diversify their acquisitions across different countries and market cycles. Irish and UK investors are spearheading this activity as, with the exception of London, UK income growth becomes harder to achieve.As well as Europe’s top gateway cities, investors remain keen on Central and Eastern European cities, Russia and the new star city Istanbul, which reported the strongest growth in room yield this year.”
* Intra European investment is cross border investment within Europe, but excluding investment from the Americas and Asia Pacific.