As tourism gradually returns to normal activity levels, the hospitality industry expects to register solid returns this year. The sector showed resilience in 2021 and global hotel investment posted particularly impressive figures with private investors and resort hotels at the forefront. 2022 looks set to follow a similar pattern.
Global hotel investment in 2021
After 2020, one of the most catastrophic years in the history of lodging, 2021 posted excellent results for global hotel investment. According to the JLL Global Hotel Investment Outlook 2022, RevPAR recovery in 2021 compared to 2019 ranged from 50% to 79%, depending on the region. The Americas posted the highest figure.
Hotels catering for holiday demand experienced a more even recovery than those targeted at the business market. The same was true for hospitality heavily reliant on international tourism, with hotels dependent on domestic demand faring considerably better.
Favoured sectors in 2021
Resort hotels emerged as the firm favourites for global hotel investment in 2021 and performed far better than urban lodging. JLL reports that sales of assets in resort locations reached US$9.2 billion worldwide last year, an increase of 17% in 2019. Investment in assets in urban areas, on the other hand, fell by 22% compared to 2019.
Key takeaway
“Investors keen on acquiring resort or luxury assets are best positioned to be the first to benefit from pent-up travel.”
Increase in private investors
While funds remained active in global hotel investment, private investors rose to the forefront in 2021. According to JLL, private equity investors bought US$32.5 billion in hotel assets last year. This translates to 50% of all transactions. Significantly, the figure lies way ahead of both 2020 (up by US$25.4 billion) and 2019 (up by US$8.4 billion).
The Americas favoured destination
In terms of global investment, the Americas were by far the busiest region. The JLL report finds that investment levels in hotels in this part of the world constituted almost two-thirds of the total worldwide.
Total hotel sales in the Americas in 2021 reached US$38.6 billion, up 269% in 2020 and, more significantly, up 32% on 2019. JLL highlighted the sales of 14 luxury hotels/resorts at over US$1 million per key.
Key takeaway
“The Americas was the most liquid region and accounted for nearly 60% of global hotel transaction volume.”
Global hotel investment in 2022
The Outlook predicts transaction activity to “accelerate even further with global transaction volume to increase between 35% to 40% from 2021 levels”. The uptick would mean that by the end of 2022, global sales would be equivalent to those in 2015, the highest on record.
JLL bases its forecast on three main factors:
· The record level of capital available among private equity investors.
· The “three red lines” campaign in China is expected to boost hotel sales.
· The potential for distress buys in the Americas as US$31 billion in hotel loan debt matures.
Final thoughts
Global hotel investment is, of course, not without its challenges. JLL highlights that the lodging industry is currently undergoing an immense transformation, one of the biggest ever. Pent-up demand has put pressure on hotels that need to adapt quickly.
Environmental concerns have also risen to the forefront, and as a result, hotels must now focus on becoming more sustainable and reducing their carbon footprint. However, JLL believes that the combination of tech solutions and strategic leadership will be vital to overcoming these challenges over the next year.
Read the compelling case for hotel investment in 2022.
(Source: JLL)
