This year will likely be another strong one for the global hotel investment market, although investors might be more cautious, according to a report by real estate services firm Jones Lang Lasalle.
In the report, JLL noted that 2015 marked a strong year for the global hotel investment market, as it recorded hotel transactions worth a whopping $85 billion, a 50 percent growth from the previous year.
Last year also saw the highest ever volume of single-asset transactions worth $47 billion, JLL noted.
JLL projects such growth to be sustained, although at a slower pace, as investors’ desire to buy, it observed, is now more measured.
As such, JLL set its forecast hotel transaction volume for 2016 at $70 billion.
“Investors are starting to consider what holding assets through a down cycle will look like and making more careful considerations around financing structures,” JLL said in its report.
The report added that the volatility of stock markets across the globe is also weighing in on investors’ sentiment.
Some of the key issues challenging global investors now are the impact of low oil prices in Middle East economies, unpredictability in equity markets, a prolonged slowdown in China, and economic malaise in emerging markets, such as Brazil and Russia.
The JLL report also mentioned that factors relating to travel and tourism could impact on hotel transaction volumes in a negative way.
These include terrorism, political conflict, natural disasters, and pandemics. It cited the recent Paris attack as an example of how terrorism affects tourism.
“While fears about terrorism are not derailing travel globally, certain markets will see pressures,” the report said. “Even Paris has not been immune to a slowdown in visitor arrivals. But based on the precedent in other cities which have faced attacks, the travel disruption should be short-term.”
On a brighter note, JLL said a higher-than-expected push from capital exporters in China and the Middle East would put an upward pressure on the deal flow of hotel transactions.
It also cited the ease of a 35-year-old tax law on foreign investment in U.S. real estate signed by the US, which could open the door to greater purchases by overseas investors.
“Any large corporate-level real estate mergers and public-to-private acquisitions, of which a few are expected, would create a further spike in volumes,” the report said.