Global investors are demonstrating more confidence in the amount of hotel transactions in the EMEA region for both the short and medium-term future than they did earlier this year, according to the Global Hotel Investment Sentiment Survey from Jones Lang LaSalle.
Of the 31 cities tracked in the survey, 21 are expected to record performance growth over the next six months. The number increases to 28 cities when focused on the medium term (two years).
Investor confidence is highest in German cities -- Munich, Frankfurt and Hamburg -- which continue to benefit from robust underlying market fundamentals, JLL said. They are followed by London and Paris.
"We have already started to see rising interest from institutional investors keen to tap into the hotel market as they provide higher returns than alternative real estate options," Jon Hubbard, CEO Northern Europe at JLL H&H, said in the report. "Alongside this institutional interest, we continue to see HNWI and Sovereign Wealth Funds looking to acquire trophy assets in key cities throughout Europe."
In the next six months, approximately 50 percent of investors are primarily focusing on acquisitions, and are broadening their search to markets such as Dublin, Manchester and Barcelona, JLL reports. The acquisition focus fell 11.4 percent since the previous survey in April, possibly reflecting investors focusing on managing assets already acquired in 2013.
Short-term capitalization rate requirements are expected to remain relatively steady, increasing marginally to 7.2 percent compared to 7.1 percent last April.
Investors anticipate hotel trading performance to decrease in Lisbon, Milan and Madrid over the next six months, reflecting the impact from continued economic uncertainty in Southern Europe on the region's domestic tourism.
However, Barcelona is resisting the trend, recording RevPAR growth despite the city's 70 percent increase in hotel supply over the last 10 years, according to the report.
"In our previous report short term trading expectations, although positive, were rather cautious, with a positive net balance sentiment of 7.5 percent," Christoph Härle, CEO Continental Europe at JLL H&H said. "Just six months later, investors are more optimistic, with a 31.7 percent positive net balance for the short term and 58.5 percent during the medium term, making Barcelona one of the top 10 cities in terms of investor confidence, just a few places behind London and Dubai."
Contrary to initial expectations, short term hotel trading expectations in London are strong as the post-Olympic boom and a rise in consumer confidence continues to have a positive effect on hotel performance.
"With hotel supply expected to grow circa 8.0 percent over the next two years, potentially forcing hoteliers to cap average rates, one might expect the medium term outlook to be more pessimistic, however, the survey results show that investors are more hopeful about trading expectations in the UK capital," Mr. Härle said.