Home Investment

(SAN DIEGO, CALIFORNIA) — Following a disappointing hotel investment year in 2009, Jones Lang LaSalle expects more deals to be made in 2010, with many of the sales being financed by the sellers. Qatar 
JLL describes 2009 as "the year of a new reality" in its recently published Hotel Investment Outlook report.
"Some investors fled to the sidelines as debt markets remained illiquid and fundamentals started to deteriorate."
The number of hotel transactions in the Americas fell by 78 percent to $2.1 billion, the lowest amount in a decade.
"Hotel transactions in the Americas will face another challenging year in 2010," according to the study, "as the industry remains hindered by insufficient debt liquidity."
"The bottoming-out of RevPAR, the large amount of equity entering the market, and increased pressure on some owners and lenders to sell or recapitalize assets would all contribute to a rise in transaction volume."
According to JLL, these factors would lead to a narrowing of the bid-ask spread and a rise in seller-financed transactions.
"This is the first increase in two years," said Arthur Adler, managing director and CEO-Americas for Jones Lang LaSalle Hotels. "However, it is still roughly 40% below the annual volumes reported from 2000 to 2003."
"Transaction volume would reach $3.5 billion to the degree that many portfolio transactions are completed."
As the industry begins to reset itself in 2010, significant gaps in the operating and investment environments of hotel markets around the Americas will arise, according to Adler.
"Investors will hop back into the industry once hotel fundamentals are near the bottom in the United States," he predicts, "attracted by the big discount to both replacement cost and peak prices."
"The recovery will be resilient due to the fixed costs that have been taken out of the market, much of which is manageable, and the fact that the liquidity crisis will choke-off new supply for the near future," according to investors.
There will be more strain on banks in 2010, as they have already extended loans for six to twelve months, and foreclosure and deed-in-lieu activity will likely increase, but a tidal wave of distressed buying opportunities is not anticipated."
In terms of demand dynamics, South America has largely escaped the debt crisis and is predicted to lead the way in 2010.
"Brazil, Latin America's largest economy, emerged from recession in the second quarter of 2009 and now represents the continent's most lucrative hotel investment market," says Clay Dickinson of Jones Lang LaSalle Hotels.
Following that are Colombia, Peru, and Chile.
As a result of substantial rises in lodging availability and the mixed repercussions of this year's presidential election, Colombia's operating climate poses some investment challenges.
"However, economic growth has been robust, and real estate industry transparency has greatly improved," the study says.
Peru has shown resilience in the face of the economic downturn, and the construction of branded limited-service hotels is an increasing investment opportunity.
Chile has seen significant rises in lodging supply as well, but the country's status as a bright spot for hotel investment over the next five years is expected to be bolstered by a stable macroeconomic climate and an improving economy.
'While new lending ability will remain small, 2010 will mark the beginning of a new lodging cycle; a time when the investment community will begin to shift from a year of realization to one of increasing opportunities,' says the report "According to Adler,
"Savvy buyers with a solid cash position and the ability to be competitive will profit from the select buying opportunities that arise, and the early movers will reap the greatest rewards."
Jones Lang LaSalle Hotels advised on over $3.7 billion in sales, purchases, and funding transactions involving more than 120 properties in 2008.