Figures from TRI Hospitality this week confirm just how dramatic the turn was when it came. The first nine months of trading for hotels in London, for example, were robust, with sales up 4% and profit up 3%.
But by October trading was much tougher. The final three months saw sales down 6% and a 9% fall in profit, in a year-on-year comparison of the same period.
Across Europe, the numbers look just as bleak. Of the 10 cities in the TRI HotStats survey for Europe, seven were in negative profit territory for 2008 as a whole.
Hardest hit of the 10 for the full year is Prague with profits down nearly 30%. London finished the year in fourth place in terms of profits growth, ahead of cities like Paris, but behind Budapest, which was nevertheless the weakest of the 10 in absolute numbers, and Berlin and Hamburg.
The weak hotel performance numbers match weak numbers for airline traffic across Europe. The International Air Transport Association said this week that December had seen a 4.6% decline in passenger traffic. The full year showed a modest increase of 1.6%.
Jones Lang LaSalle Hotels confirmed the bleakness of the hotel transaction market this week with its Hotel Investment Outlook 2009 report. Worldwide, $23bn worth of hotels changed ownership in 2008, down from $113bn in 2007. A further decline to just $19bn is forecast for this year.
The greatest decline was in the US, down 82% to $8.2bn, with Asia Pacific down 80% to $2.5bn and EMEA down 58% to $12bn.
JLL's Arthur de Haast predicted that the first half of 2009 will be as idle as lat 2008 "but the second half of 2009 will likely see more activity with a shake out of investment portfolios as some investors will be forced to sell or make strategic or portfolio decisions to dispose of assets even while pricing remains weak".
The report said that opportunistic investors are already searching for distressed assets. But 2009 will not produce a tidal wave of sellers because owners will be reticent to sell into an illiquid market unless forced to as a result of their weakened financial condition.
Rather than private equity, it will be institutional investors, selected sovereign wealth funds and high net worth individuals that will dominate the market, said JLL.
Confidence is likely to be fragile for an extended period even when lending and economic fundamentals pick-up. This makes transactions tough to close for all but the most attractive assets, concluded JLL.