Global hotel transactions are expected to grow by up to 40 per cent to as much as US$30 billion (Dh110.18bn) next year after a significant improvement in activity this year, Jones Lang LaSalle Hotels says.
"Following a very challenging year in 2009, characterised by frozen liquidity, stalled transactions and drastic drops in hotel performance and values in many hotel markets globally, 2010 signalled dramatic improvement and a fresh pace for opportunistic, cashed-up buyers," the property consultancy said yesterday.
An improved operating environment for hotels, with the travel industry recovering from the global downturn, was helping to motivate buyers and sellers.
"Among the active buyers, the firm anticipates to see [real estate investment trusts], institutional investors and private and high-net-worth investors with opportunistic capital investing next year."
In Dubai, Union Properties last month said it had sold its Ritz-Carlton hotel next to the Dubai International Financial Centre for Dh1.1bn. "With more stock hitting the market in 2011, there will again be an increased depth and breadth of opportunities for investors," said Arthur de Haast, the global chief executive of Jones Lang LaSalle Hotels.
"Until liquidity improves in the debt markets, however, the most acquisitive hotel investors will likely be those that make all-equity purchases or structure acquisitions with low leverage levels."
The company said that hotels had become more of a "mainstream" asset class over the past decade, but they were complex investments because they carried property and business risk. Investors are likely to remain highly cautious about the properties they select after the downturn.
Globally, the value of hotel sales fell 64 per cent last year to $9.4bn, Jones Lang LaSalle said in a report earlier this year.
In Dubai in particular, many developers entered the market during a boom period for the hotel industry as rates and occupancies rose dramatically.
A number of these properties remain unfinished, debt is not as easily available, and the returns on projects, if completed, would not be as high as initially expected.
"Much of the equity is focused on quality assets in prime locations, so there is still likely to be trauma for difficult assets in secondary locations, or those markets that are still struggling with supply issues or continuing weakened demand," Mr de Haast said.
"Debt remains selectively constrained in the markets which relied heavily on leverage in the lead-up to the global recession, such as the US, UK, Ireland, Japan and Spain, but it is easing.
"Nevertheless, new lending will remain fairly limited until lenders fully rebuild their balance sheets and write down asset values, a delicate process which needs to be carefully balanced and is taking longer than expected."