According to JLL’s latest hotel investment outlook report, global hotel liquidity was down more than 60% from 2019 levels, with nearly 50% of all transactions closing within the first three months of the year. Private equity groups and institutional investors capitalised on assets that were made available for sale and drove liquidity last year, accounting for 54% of total volume in the year.
Meanwhile, an estimated 21% of global hotel investments were in resort markets, signalling the current investment appeal of less dense markets. This niche group of investor interest is expected to be a catalyst in driving hotel investment volume upwards of 35-40% from 2020 levels.
Findings from the report show that Covid-19 has introduced a wave of trends that have accelerated as hoteliers shifted their operations and strategy.
Firstly, it found that in the short-term institutional and non-traditional investor interest in open-air hospitality sector across Europe will continue to grow.
The past year witnessed accelerated growth in this sector as venues offered easy access drive-to-destinations for European travelers. Investors now trust the resilience of the business model of holiday parks with their potential to offer higher yields than mainstream hospitality. With deals in this sector often topping $1bn (£700m), interest is largely driven through institutional and private equity investors.
Also private equity groups and high-net worth individuals are expected to continue to be active investors of hotel assets over the course of this year. According to the report, in 2020 around $24.5bn in capital was raised in closed-end funds targeting hotel and hospitality assets globally, matching 2016 levels.
Additionally, as a result of the pandemic consumers will be looking for larger, individual and private accommodations to stay for longer periods, meaning extended stay hotels and vacation/residential options outperformed the greater accommodations industry.
“It’s been a difficult year for the sector due to the pandemic and subsequent lockdowns across Europe,” said William Duffey, head of EMEA hotels & hospitality capital markets at JLL.
“In order for hotel assets to make the comeback that we believe it will, they must remain agile and adopt these changes as the industry continues to be tested in ways it never has. There’s no doubt that the road to recovery will be long, but there is optimism that pent-up demand to reexperience the world will gradually boost hotel performance across European markets.”