Hotel Transaction Volume May Continue to Drop in 2009
Chicago-Following an 80% drop in global hotel transaction volume last year, 2009 will exhibit a further decline, to levels last seen between 2001 and 2003, according to Jones Lang LaSalle Hotels' Hotel Investment Outlook 2009 report.
The report reveals that $23 billion worth of hotels changed ownership in 2008, down from $113 billion in 2007, as the credit crisis and the chilling effects of the global economic slowdown took hold. With no short-term market recovery likely, the forecast for 2009 is for transactions worldwide to further decline to $19 billion in 2009.
"The United States registered the greatest decline in transaction volume, down 82% to $8.2 billion in 2008, followed by Asia Pacific, marking a decline of 80% to $2.5 billion," said Arthur de Haast, global CEO of Jones Lang LaSalle Hotels. "Our research highlights that EMEA proved comparatively more resilient: transaction volume amounted to $12 billion, 58% lower than the level recorded in 2007."
Mr. de Haast added that the first half of 2009 will be equally idle as late 2008, but the second half of 2009 will likely see more activity.
While equity is available in the marketplace, the credit markets will continue to be the greatest challenge facing hotel investors in 2009. Highly leveraged investors such as private equity funds, the largest buyer group of hotel assets from 2005 to 2007, will shift to the sidelines in many markets, replaced by institutional investors, sovereign wealth funds and high net worth individuals.
The year 2009, according to the report, will see a continued slowdown in the global movement of capital as cross-border investment is curtailed in favor of maintaining capital at home. Investors have flocked to emerging markets based on runaway economic growth and attractive returns but in 2009 a number of cities in emerging markets will feel mounting pressure on operations.
Once lending and economic fundamentals start to pick up, activity could rise if a consensus builds among investors and lenders that the bottom of the market is in sight.