The UK is pulling away from the rest of Europe, the Middle East and Africa (EMEA) by accounting for nearly half of all hotel deals across all three regions, according to new figures from Jones Lang LaSalle’s (JLL) Hotel & Hospitality team.
And Britain’s dominance is even more marked, claims the property services provider, by national figures which show the UK’s half-yearly hotel transactions are up a staggering 172 per cent on the same period last year.
Between January and June, UK regional portfolios proved particularly attractive to North American private equity and investment funds which transacted over €1.1bn (£770m) — 57 per cent of all regional UK portfolio deals in the UK — during the six months.
Lonestar Funds, the private equity firm specialising in distressed assets, has been the most active investor in the UK. It has spent over €1.7bn (£1.1bn) on more than 13,000 rooms in London and regional locations already this year.
“It is of little surprise to those in the market that private equity and investment funds are continuing to target European hotels,” commented Christoph Härle, chief executive of the agency’s hotels and hospitality EMEA team.
“This is a market where yield and visitor base is consistently strong and we are now seeing this type of investor further gather in confidence and start to look beyond the major city hubs and invest in periphery markets and in regional centres.”
His team’s latest figures show that half year volumes in Germany indicate a 60 per cent uplift with hotel deal volumes reaching €1.4bn (£98m), with 2015 seeing a significant number of single asset and portfolio transactions. The largest German portfolio deal so far this year was the sale of 18 Accor hotels as part of a sale-and-franchise-back deal to Event Hotel Group for €150m (£105m).
JLL also reports that all three regions are seeing a rash of Chinese capital enter the market. “A red-tape-laden approval process for overseas investments previously hindered Chinese investors investing more than $100m (£64m) overseas,” explained Härle, “but since China’s Ministry of Commerce has changed the rules, they have effectively changed the game.
“Earlier in the year JLL predicted that in 2015, Chinese capital was expected to represent some $5bn (£3.2bn) in global hotel investment. In the EMEA so far this year we have already seen $1.9bn (£1.2bn) invested by Jin Jiang for the Louvre portfolio and we expect to see more deals before the year is out.”
Härle added that while Eurozone heads are working with the Greek government to save the country from financial collapse, protecting the tourism industry in Greece will be important for those sitting on both sides of the table in Brussels. Tourism is one of the main sources of earnings for the debt-ravaged economy and last year contributed to nearly 10 per cent of Greece’s gross domestic product.
“For opportunistic investors, the recent course of events represents an opportunity to enter a market which will go through a recovery once a positive settlement is reached in Brussels,” he said.
“Once agreement is reached there should see confidence returning to the tourists and lending banks alike which will helpful to investors looking to acquire assets.”
