Hotel investment checking back in

Hotel investment in Europe, the Middle East and Africa (EMEA) is picking up, with accelerated growth expected in the second half of the year, Jones Lang LaSalle Hotels says. Investment in hotels increased to ?1.6 billion (Dh7.63bn) at the end of the first half of this year, up 6 per cent from the same period last year. The property consultancy said yesterday it expected activity to double in the second half of the year, with investors taking advantage of some of the attractive property prices that have become available after sharp falls during the downturn. The analysts noted there was "relatively strong" interest in the hotel market from Middle East investors, with the region's share of the market growing to 14 per cent in the first half of the year from 8 per cent during the same period last year.

"The dynamics of the market have changed and deals are taking longer to complete, with both buyer and seller approaching negotiations with caution," said Mark Wynne Smith, the chief executive at Jones Lang LaSalle Hotels for EMEA. "We are starting to see sellers acknowledge that buyers' pricing is acceptable, given the current economic climate, which is likely to drive increased deal volume as the year progresses."

This week, Khalid bin Kalban, the chairman of Union Properties, said the company was close to sealing a deal for the sale of its Ritz-Carlton hotel, under development at the Dubai International Financial Centre, to a UAE buyer. He said the company expected to secure close to its asking price of Dh1.5 billion (US$408 million). Analysts at Jones Lang LaSalle said in a previous report that with many developers in the region experiencing financial difficulties, more hotels were likely to be put up for sale in Dubai this year. But in the first half, most of the activity took place in the UK.

"The UK has been the most active market in 2010, with over ?300 million of investment transacted, which represents a 19 per cent market share compared to 14 per cent in 2009," the latest report stated. "Last year's leader, France, is not far behind, with just under ?270 million invested." Investment from European sources was strong, rising to 34 per cent of the market in the first half from 18 per cent in the same period last year. Investment from the US, however, continued to be weak, the analysts said.

Jones Lang LaSalle said there had not been any significant investment from Asian buyers, "despite strong interest from this region, in particular south Asia". "These types of buyers tend to look for good-quality assets in London and Paris at discounted prices, which are hard to find in today's market as buyers outnumber sellers by a considerable margin." The analysts noted that hotel operators, institutional investors and investment and hedge funds made up 65 per cent of investors in the EMEA market in the first half, adding they were benefiting from less competition for hotel assets from high-leverage buyers who had "fallen out of the market".