Chinese Capital to Solidify its Mark on the Global Hotel Market
February 10, 2015 – JLL’s hospitality experts project that global hotel transaction volumes will reach an eight-year high between US$65 to US$68 billion in 2015, representing a 15 percent increase over 2014 volumes. JLL’s forecast is based on the firm’s 2015 Hotel Investment Outlook, a forward-looking, global analysis that tracks key factors affecting the hotel investment market.
“The hotel market continues to strengthen and investors are eager to chase after top hotel deals,” said Mark Wynne-Smith, Global CEO, JLL Hotels & Hospitality. “We predict a rise in revenue per available room (RevPAR) of 5 to 8 percent this year, and that bodes well for the sector with even more runway ahead.”
There are several drivers of hotel transaction activity across the global in 2015, including:
- strong demand fundamentals,
- increased liquidity in the debt markets,
- record-high levels of single-asset trades,
- more portfolio activity in secondary markets, and
- a swell in off-shore capital.
Transaction volumes in Europe, the Middle East and Africa (EMEA) is expected to garner US$24.7 billion this year. Activity in the Americas region will lead the way and could reach US$34.5 billion, while Asia Pacific’s numbers are projected to tally US$8.5 billion in 2015.
Global Game Changer
United States-based private equity funds and Middle East investors are expected to remain among the top exporters of outbound capital. It is the Chinese, however; who will lead the pack in terms of year-over-year increases in capital deployed.
Chinese outbound capital experienced unprecedented growth in 2014 behind the strength of China’s growing economy and appreciating currency. China’s Ministry of Commerce’s policies relaxed restrictions on big-ticket foreign investments and simultaneously loosened the approval process for overseas purchases. This adjustment allows Chinese investors better access to the world’s key global markets such as London, Paris, New York, San Francisco and Sydney.
JLL expects Chinese outbound capital to account for US$5 billion in 2015, a five-fold increase on 2014. This places Chinese investors among the ranks of top exporters such as the United States and the Middle East, when a few years ago China did not rank in the top-ten list.
Regional Overview
EMEA: Total EMEA hotel investment volumes are forecasted to reach US$24.7 billion in 2015. Investment sales activity will be driven by single-asset transactions, led by London and Paris, while portfolio deals are anticipated in the U.K., Germany and Spain. Private equity shops will increasingly look to acquire assets in Southern and emerging European markets in pursuit of higher yields. Middle Eastern outbound capital will remain strong, targeting trophy assets in primary markets. JLL anticipates an uptick in securitized lending as well.
The Americas: Private equity funds are ready to deploy capital and top targets include select service portfolios, resorts and secondary markets. Canada’s hotel market continues its robust performance while Mexico’s liquidity continues to rise due to the traction gained by new REIT-like investment vehicles formed in 2012. Investors are cautiously approaching Brazil’s market, but the northern region of South America has become an investor hot-spot, with Colombia at the helm. In the United States, debt remains readily available and hotel CMBS issuance is back to more than 60 percent of its previous peak.
Asia Pacific: A transaction volume increase of 10 to 15 percent is anticipated, marked by growing interest in Japan, and in particular for portfolio deals in the country, as well as steady confidence in Australia. Indonesia will be a favoured market driven in part by currency plays, and liquidity in China is set to rise as well.
