European hotel investment reaches £14.4b in 2006

Hotel investment levels in Europe reached €21.6b (£14.4b) last year, 37.9% up on 2005 and more than double the deal volume of 2004, research has revealed.

Last year saw portfolio transactions at an all time high across the region with the UK remaining the leader in hotel investment activity taking 56% share, according to the report from property agents Jones Lang LaSalle Hotels.

Europe boasted the most international profile of investors with almost half of the total investment coming from outside the continent: 26% global sources, 10% Middle Eastern, 9% from the USA and 3% from Asia, it said.

Private equity houses continued to hold the lion’s share of total hotel investment in 2006 representing 43%, while high net-worth individuals represented 13%, property companies 11%, real estate investment trusts at 6% and institutional investors 5%.

Mark Wynne-Smith, chief executive for Europe at Jones Lang LaSalle, said a new type of hotel vendor is likely to emerge in 2007.

We may see a number of private equity investors selling off their hotel assets, perhaps looking to enter emerging markets,” he said. “We also expect institutional investors to gain momentum in hotel investment. 

REITs may take a little longer to establish in the market as hotels must take further steps to restructure their rental agreements to become suitable for the REIT model.”

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By Daniel Thomas

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