Lack of Liquidity to Further Drive Down Hotel Transactions in 2009

Following an 80% drop in global hotel transaction volume in 2008, Jones Lang LaSalle Hotels, Chicago forecasts that this year will have a further decline, to levels last seen between 2001 and 2003, according to the firm's 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. Our research highlights that EMEA proved comparatively more resilient - transaction volume amounted to $12 billion, 58% lower than the level recorded in 2007," said Arthur de Haast, global chief executive of Jones Lang LaSalle Hotels. "The first half of 2009 will be equally idle as late-2008, but the second half of 2009 will likely see more activity - a shake out of investment portfolios as some investors will be forced to sell or make strategic portfolio decisions to dispose of assets even while pricing remains weak," said Mr. de Haast. 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, selected sovereign wealth funds and high net worth individuals.