Investment in the UK hotel sector has soared in the past year, with deals up over 170 per cent in 2014 and Chinese demand booming.
Half year volumes from JLL’s Hotel & Hospitality team indicate that 2015 is set to be a bumper year for hotel deals in Europe, Middle East and Africa (EMEA).
Indeed, EMEA transaction volumes totalled €12.2 billion in the first six months of 2015, up 85 per cent compared to the same period in 2014. This rise is primarily driven by the UK which is pulling away as the stand-out regional leader accounting for nearly 50 per cent of all hotel deals and up a staggering 172 per cent on 2014.
Private equity and investment funds, particularly from North America, continue to actively target European hotel investment opportunities. In H1 2015, UK regional portfolios proved particularly attractive to North American funds, with transactions totalling over €1.1bn (57 per cent of all regional UK portfolio deals in the UK) during this period.
Part of the growth across the region, though, has been fuelled by the entry of Chinese capital into the market.
“A red-tape-laden approval process for overseas investments previously hindered Chinese investors investing more than $100 million overseas,” comments Christoph Härle, CEO EMEA JLL Hotels & Hospitality. “But since China’s Ministry of Commerce has changed the rules, they have effectively changed the game.”
“Earlier in the year we predicted that in 2015, Chinese capital is expected to represent some $5 billion in global hotel investment. In EMEA so far we have already seen $1.9bn invested by Jin Jiang for the Louvre portfolio and we expect to see more deals before the year is out.”
Half year volumes for hotels in Germany indicate a 60 per cent uplift with hotel deal volumes reaching €1.4 bn.
In the opposite corner of the European economy, Greece’s ongoing debt crisis could provide decisive for the health of the country.
“Protecting the tourism industry in Greece will be important for those sitting on both sides of the table in Brussels,” adds Härle. “Tourism is one of the main sources of earnings for the debt-ravaged economy and last year contributed to nearly 10 per cent of Greece’s gross domestic product.”