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Projected net-inflows to Europe and open-air hospitality driving optimism for 2021


24 Feb 2021


JLL’s latest Hotel Investment Outlook report outlines anticipated investor interest and trends since the onset of the pandemic

EMEA, Feb. 24, 2021– Uncertainty and caution plagued hotel investor interest in 2020 due to the COVID-19 pandemic, however, the global lodging industry is poised to rebound in 2021. According to JLL Hotels & Hospitality’s annual Hotel Investment Outlook, the industry’s resilience shaped new experiences and demand from consumers while introducing a wave of trends that have been accelerated as hoteliers quickly shifted operations and strategy.

The Global & EMEA Outlook

Global hotel liquidity was down more than 60% from 2019 levels, with nearly 50% of all transactions closing within the first three months of the year. Although challenging to navigate through a zero cash-flow environment, lenders were accommodating by granting forbearance agreements where possible. This was particularly pronounced in the UK where the government announced an extension of rent protection until March 31, 2021. However, pent up demand for a return to travel should lead to a bounce back in demand once restrictions are lifted across Europe.

Private equity groups and institutional investors capitalised on assets that were made available for sale and drove liquidity in 2020 by accounting for 54% of total volume in the year. Approximately 21% of global hotel investments were in resort markets, signaling the current investment appeal of less dense markets. This niche group of investor interest is expected to be a catalyst in driving hotel investment volume upwards of 35-40% from 2020 levels.  

The pandemic will undoubtedly have long-term implications on the industry, over the short-term the following are trends to keep top-of-mind:

  • Institutional and non-traditional investor interest in open-air hospitality sector across Europe continues to grow. Pre-pandemic changes to the dynamics of the leisure market and the rise of the “staycation” continue to drive demand for open-air hospitality. The past year witnessed accelerated growth in this sector as venues offered easy access drive-to-destinations for European travelers. Investors now trust the resilience of the business model of holiday parks with their potential to offer higher yields than mainstream hospitality. With deals in this sector often topping $1 billion, interest is largely driven through institutional and private equity investors.
  • Private equity groups and high-net-worth individuals (HNWI) will continue to be active investors of hotel assets in 2021. According to the report, in 2020, $24.5 billon in capital was raised in closed-end funds targeting hotel and hospitality assets globally, matching 2016 levels. Additionally, all regions globally are seeing a flurry of fundraising activity with opportunistic capital ready to mobilize on distressed assets, allowing non-traditonal investors to get a piece of the lodging pie at a competitive price. There is expected to be a net capital inflow to Europe in 2021, which should drive demand across depreciated hospitality assets.
  • Consumer preferences drive hotel room redesigns and the acceleration of technology advancements. Consumers slowly started to travel again during the pandemic, with noticeable preferences for larger, individual and private accommodations to comfortably stay for longer periods of time and work productively, remotely. Because of this, extended stay hotels and vacation/residential rental options outperformed the greater accommodations industry. Additionally, operators accelerated their technology advancements, as touchless/contactless service became a priority for consumers. Adaptability and catering to longer-term working vacations, particularly within the EU offer a strong avenue of growth for hospitality.
  • Pressure to prioritize real estate investments grounded in ESG principles at the global stage takes precedence. Globally, the commercial real estate sector has a notable role to play in promoting ESG principles. As part of this sector, the lodging industry has the opportunity to meaningfully accelerate ESG principles. Furthermore, the recent increased spotlight on issues of race has renewed the focus on advancing diversity and inclusion initiatives across all industries, particularly at the upper management level. That said, consumers are becoming more aware of the values that guide how companies are conducting business and using their purchasing power to affect change.

William Duffey, Head of Capital Markets, Hotels and Hospitality, Europe, JLL, said: “It’s been a difficult year for the sector due to the pandemic and subsequent lockdowns across Europe. In order for hotel assets to make the comeback that we believe it will, they must remain agile and adopt these changes as the industry continues to be tested in ways it never has. There’s no doubt that the road to recovery will be long, but there is optimism that pent-up demand to reexperience the world will gradually boost hotel performance across European markets.”

JLL’s Hotels & Hospitality Group has completed more transactions than any other hotels and hospitality real estate advisor over the last five years, totaling $83 billion worldwide, and across EMEA, JLL advised on €13.4 billion of hotel sales over the same period. JLL’s hotel valuation, brokerage, asset management and consultancy services have helped more hotel investors, owners and operators achieve high returns on their assets than any other real estate advisor in the world.

For more news, videos and research resources on JLL, please visit our newsroom.


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