• Transactions market continues to rise

The US transactions market was described last week by Jones Lang LaSalle Hotels as seeing a "striking turnaround", driven by single asset transactions.

The comments came at the same time as HVS London forecast that hotels in Paris would reach a new high of an average value of Eu650,000 per room by 2015, providing further evidence that the recovery of the hotel transactions market was becoming increasingly solid.

The growth in Paris hotel room values – currently the most expensive city in the world for room stock – is expected to be driven in the main by shortage of available properties. The report said that the lack of sites meant that quality hotels in the French capital were turning into trophy assets for international investment by private individuals and funds.

However, while the polarisation between prices of trophy hotels and, say, two-star properties in Ireland, became more pronounced during the downturn and was further illustrated by the predictions for the Paris market, comments from Jones Lang LaSalle Hotels looking at the US market suggests a broader recovery.

The group said that US hotel transaction volume reached $4.9bn for the year to the end of May, triple the volume recorded during the first five months of 2010. Single-asset hotel transactions accounted for 85% of deals. Robert Webster, a MD for Jones Lang LaSalle Hotels, said: "The average single-asset transaction size jumped to $84m during the first five months of 2011, doubling on the prior-year period. The average price per key of single assets that transacted during the period increased 27% to top $234,000."

Reits continued to lead the deals market, accounting for a 61% of single asset transaction volume, followed by private equity investors, the second most acquisitive group, representing 25% of purchases by volume.

"We are seeing a striking turnaround in the market for hotel transactions. Building on improving lodging fundamentals which gained strength last year, the volume of capital flowing to hotel real estate has ignited as acquisitive investors re-entered the market in full force, leading to a 170% increase in transaction levels," said Arthur Adler, MD and CEO-Americas for Jones Lang LaSalle Hotels.

The report came as the company's Hotel Investor Sentiment Survey reported that that investors' ‘buy' sentiment reached a six-year high in the US, with 59% of respondents indicating that their primary investment intention over the next six months was to acquire assets.

"Based on the pace recorded thus far in 2011, we are confident that transaction volume forecast of $13bn for full-year 2011 will be met or exceeded as momentum in the market further accelerates," said Adler.

The transactions market in Paris remained steady during the downturn, much as it did in London, with seemingly recession-proof trading encouraging investors to seek a safe haven for their money, so news that prices were expected to reach new highs was good news for those who beat out the competition to acquire assets in the city, but not an accurate barometer for the rest of the sector.


HA Perspective: Brokers telling you the transaction market is strong is akin to a used car salesman telling you that he is offering you the deal of a lifetime. In the (misquoted) words of Mandy Rice-Davies: "Well he would say that, wouldn't he".

It is certainly true that there is more optimism in the industry. At the New York University hospitality investment conference earlier in June there was a clear sense of optimism and expectations that 2011 would continue to see a bounce back from trading drops post-Lehmans.

But credit, despite what relationship lenders at banks tell you, remains desperately tight. Given the scale of the financial disaster credit is likely to remain tight for some time, a situation which any bank losses thanks to the latest Eurozone problems is not going to help.

Until credit comes back, the transaction market will remain subdued. We are many months, probably a few years, before lending levels recover sufficiently to enable a strong transaction market.

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