Global Hotel

Investment Trends 14.88

State of the Lodging Industry | Q3 2023

JLL Research Hotels & Hospitality

Quarterly trends – Q3 2023
Performance remains elevated, albeit growth is beginning to slow in many markets
01 • Global RevPAR remains robust, increasing 12% relative to 2019 through the first nine months of the
year. Almost all regions are fully recovered with Europe leading the way, followed by the Middle East
and the Americas. While Asia Pacific has yet to fully return to pre-pandemic levels, performance has
surged since China’s reopening.
• Expect urban markets to accelerate as group, corporate, and international travel reemerge. Resorts will
likely contract leading to some stabilization in broader global performance over the coming months.

02 Foreign investment to be more present in the coming months

• While inbound international travel nears full recovery, the impact of China’s reopening has yet to be
realized, thus far sparking only a boom in intraregional Asia. Geopolitical volatility and economic
uncertainty has largely limited foreign hotel investment; although some green shoots have emerged
targeting luxury assets in urban gateway markets. Look for cash-rich Middle Eastern investors to
deploy capital over the coming months, particularly in Europe and to select U.S. markets.

03 Investment slows amid accelerated headwinds, yet opportunities available

• Investors are gravitating towards urban, safe-haven markets because of ongoing capital markets
dislocation and economic headwinds. In YTD Q3 2023, urban hotel markets continued to represent
the largest portion of overall liquidity and are expected to further accelerate over the next 18 months
as pricing generally remains below pre-pandemic levels and international demand surges. Must-
have hotel assets in markets like Tokyo, Paris, London and New York will remain in high demand as
global investors look to deploy capital.

04 Luxury hotels continue to garner the most investor interest

• Luxury hotels have accounted for 22% of global hotel liquidity so far this year, the second-highest
portion in history driven by robust fundamental performance and rising yields. As global wealth grows
and consumers continue to prioritize spending on travel, look for the luxury hotel sector to garner even
more investor interest, particularly from HNWIs, and family offices. Cash-rich buyers who are less
reliant on leverage should have an advantage as debt market turbulence persists.

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 Global Hotel Investment
by the numbers | YTD Q3 2023

$33.3B Total Transaction Volume,

Down 37.6% from 2022 and down 39.6% from 2019

Total Transactions,
1,000 Down 30.1% from 2022 and up 6.4% from 2019
2nd-highest YTD Q3 total in Global history

$28.3B Total Single Asset Volume,

Down 30.0% from 2022 and down 18.7% from 2019

Full-Service Average Price per Key*

$390K Up 16.0% from 2022 and up 13.7% from 2019
2nd-Highest YTD Q3 pricing in Global history

Portion of First-Time Hotel Buyers,

22% Highest portion in Global history

Source(s): JLL Research

Note(s): Includes all transactions $5M+ excluding casinos.
*Single-asset transactions only
 NEW YORK (NY)

$2.6B Up 49% from 2019

Up 62% from 2022

Total Transaction
Volume

Top-3 largest F O R T L AU D E R D AL E ( F L )

Americas markets $1.0B Up 5x from 2019

Up 3x from 2022
Total Transaction
by transaction volume Volume
YTD Q3 2023

S AN AN TO N I O ( TX )

Source(s): JLL Research

Note(s): Includes all transactions $5M+ excluding casinos.
Portfolios are included only when all hotels traded were in the same market. Liquidity is
being driven by single-asset transactions in each market.
$864M Up 2x from 2019

Up 122% from 2022

Total Transaction
Volume
 PA R I S ( F r a n c e )

$529M Up 61% from 2019

Up 141% from 2022

Total Transaction
Volume

Top-3 largest BARCELONA (Spain)

EMEA markets $501M Up 99% from 2019

Up 2x from 2022
Total Transaction
by transaction volume Volume
YTD Q3 2023

LONDON (UK)

Source(s): JLL Research

Note(s): Includes all transactions $5M+ excluding casinos.
Portfolios are included only when all hotels traded were in the same market.
Liquidity is being driven by single-asset transactions in each market.
$440M Down 79% from 2019

Down 45% from 2022

. Total Transaction
Volume
 TOKYO (Japan)

$969M Down 59% from 2019

Up 113% from 2022

Total Transaction
Volume

Top-3 largest HONG KONG

APAC markets $768M Down 27% from 2019

Up 24% from 2022

Total Transaction
by transaction volume Volume
YTD Q3 2023

KANSAI (Japan)*

Source(s): JLL Research

Note(s): Includes all transactions $5M+ excluding casinos.
Portfolios are included only when all hotels traded were in the same market. Liquidity is
being driven by single-asset transactions in each market. *Kansai market includes cities
$575M Up 38% from 2019

Up 2x from 2022
such as Kyoto, Kobe, Himeji, among others. Total Transaction
Volume
Annual outlook - 2023

1 Multiple Stress Points and Robust

Fundamentals to Catalyze Hotel Transactions 2 Foreign Investment to Trend Upwards in Tandem
with Returning International Travel

While ongoing macroeconomic volatility has suppressed short-term Following China’s reopening, regional and European travel has already
hotel investment volume, fundamental performance continues to be seen an uptick, with travel to the U.S. likely to increase soon. Full
robust. This, combined with a substantial amount of impending debt border reopenings could be the impetus to the reemergence of cross-
maturity on the horizon, significant dry powder on-hand, rising capex border investments, which have been largely absent for the past three
needs, and nearly $19 billion in closed-end funds reaching the exit years. Look for cash-rich Middle Eastern investors to deploy capital
state of their investment lifespan over the next four years should across Europe and in select U.S. markets, particularly in the luxury
catalyze hotel investment opportunities. Buyers who are well- space. Expect India, now the world’s most populous country, to emerge
capitalized and less reliant on leverage will have an advantage. as a new global growth market.

3 Forever Real Estate Performing Best,

Particularly in the Luxury Sector 4 Societal Shifts Will Create New Growth
Opportunities

Amidst ongoing capital market dislocation, irreplaceable luxury As the lines between work, life, and travel become increasingly
assets have consistently been the most appealing and liquid. As blurred, traditional hotel brands and investors have an opportunity to
worldwide wealth accelerates, demand for luxury hotels has never expand their product offerings to new non-traditional hotel verticals
been higher evidenced by historic ADRs in many markets, including branded residential, short-term rentals, and private
particularly across Western Europe and the U.S. Investors have membership clubs, particularly in the luxury space. Look for
taken notice, with the sector becoming increasingly attractive for investors, particularly private equity and family offices, to be
institutional investment underpinned by rising profitability and yields. increasingly acquisitive in brand platforms akin to PIF’s $800M
investment into Aman in 2022.

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Increasing global wealth underpins continued industry resilience
Travel and tourism’s contribution to GDP has grown at an average annual rate of 5.3% over the past decade, which is 260 bps
higher than the average annual GDP growth rate over the same period. This trend is expected to continue underpinned by
increasing global wealth, which has nearly doubled over the past decade.

Average growth of global GDP vs. global travel & tourism GDP Total global wealth*

$500,000 $454,400

Total wealth (billions USD)

7% 6.4%
Average long-term growth

$450,000
6%
5.3% $400,000
5% $350,000
4% $300,000 $251,885
3% 2.7% $250,000
2.4%
$200,000
2%
$150,000
1%
$100,000
0% $50,000
Past Decade (2013-2022) Past Five Years (2018-2022)
$0
2000 2005 2010 2015 2016 2017 2018 2019 2020 2021 2022
Global travel & tourism GDP growth Global GDP growth

Source(s): JLL Research, Oxford Economics, WTTC, Credit Suisse (Global Wealth Databook 2022)
Note(s): *Calculated at current exchange rates

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Investors focus on smaller, single-asset transactions
All three regions benefitted from strong single-asset investment activity, with the sector’s YTD Q3 volume representing a record-
high 85.1% of total global transaction volume. Portfolios and high-dollar deals remain largely absent amidst ongoing capital market
dislocation. Resultantly, global average deal size shrank to a historic low as lenders gravitate towards smaller cheque sizes.

Americas YTD Q3 transaction volume by type APAC YTD Q3 transaction volume by type EMEA YTD Q3 transaction volume by type
$40 $80 $14 $80 $30 $90
$12 $27
$35 $34 $70 $12 $70 $80
$25 $24
Transaction volume (billions USD)

Transaction volume (billions USD)

$31

Transaction volume (billions USD)

$10 $10 $70

Avg. deal size (millions USD)

Avg. deal size (millions USD)

$30 $60 $60 $22

Avg. deal size (millions USD)

$27 $10 $10
$9
$25 $9 $8 $20 $60
$25 $24 $50 $50
$22 $8
$17
$21 $7 $16 $50
$7 $15
$20 $18 $40 $40 $15
$6 $12 $40
$15 $30 $30 $11
$10 $30
$4 $8
$10 $8 $20 $20
$20
$2 $5
$5 $10 $10
$10

$- $- $- $- $- $-
'15 '16 '17 '18 '19 '20 '21 '22 '23 '15 '16 '17 '18 '19 '20 '21 '22 '23 '15 '16 '17 '18 '19 '20 '21 '22 '23
Single Assets Portfolios Avg. Deal Size Single Assets Portfolios Avg. Deal Size Single Assets Portfolios Avg. Deal Size

Source(s): JLL Research

Note(s): Pertains to transactions worth $5 million and above. Includes entity-level transactions in which real estate was traded. Average deal size is calculated as total transaction volume divided by the
total number of transactions. Numbers on top of each bar represent total YTD Q3 transaction volume in billions.
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Foreign investment targets safe-haven markets
Europe continues to be the largest recipient of foreign investment despite significant declines vs 2019, followed by the Americas &
APAC as private equity, HWNIs, and family offices grow their presence in safe-haven markets including Tokyo, New York, and
London. Look for cash-rich investors to deploy capital over the coming months, particularly in Europe and select U.S. markets.

Capital outflows and inflows (in billions USD), YTD Q3 2023 Capital outflows and inflows (in billion USD), YTD Q3 2019

Multiple Regions $1.91

Middle East/Africa ($1.84) $0.00
Middle East/Africa ($1.00) $0.02
Asia Pacific (excluding
($0.70) $0.65
Mainland China) Asia Pacific (excluding
($1.48) $0.48
Mainland China)
North America ($0.69) $1.33
North America ($4.62) $1.94
Mainland China ($0.04)
Mainland China $0.00
Europe ($0.10) $1.55
Europe ($1.30) $4.10
South America ($0.03)
South America ($0.02)

-$6.0 -$2.0 $2.0 $6.0

-$3.0 -$1.0 $1.0
Inflows Outflows
Inflows Outflows
Source(s): JLL Research.
Note(s): Pertains to transactions worth $5m and above (excluding casinos) in which the buyer originated from a different region than where the asset is located. The capital outflows and inflows analysis excludes
non-cross border investments and unknowns.

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Debt markets are open with a key focus on quality of sponsorship
Expect the volatility of debt costs to ease through the year and more certainty to enter the market as underwriting becomes
clearer and the appetite for risk returns. Look for impending loan maturities, to catalyze transaction activity through 2023.

Key focus for lenders is quality of New financings now structured with High demand for hedging cost
sponsorship – we are seeing the significant down-side protection for management (i.e., selling caps,
wider lending community support lenders, through structures such as selling floors, buying down swaps,
the top sponsors in the current interest guarantees/reserves, lower lowering the % of notional,
climate. leverage, etc. reducing initial cap term).

Construction financing continues Increased lender scrutiny on High debt costs have created
to be selective and challenging underwriting assumptions and opportunities for alternative debt
with certain lenders taking a longer- more stress-based calculations. funds and platforms.
term view on refurb/development,
assuming schemes will deliver in a
more normalized market.

Source(s): JLL Research, Trepp

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 Thank you
Stephany Chen Patrick Saade Amr Elnady
Executive Vice President, Global Hotels Desk Head of Global Hotels Desk Managing Director, Global Hotels Desk
JLL Hotels & Hospitality JLL Hotels & Hospitality JLL Hotels & Hospitality
+1 212.812.5730 +44 786 040 8984 +97 144 362 407
[email protected] [email protected] [email protected]

Ophelia Makis Zach Demuth

Sr. Analyst Hotels Research Global Head of Hotels Research

JLL Hotels & Hospitality JLL Hotels & Hospitality

+1 312.228.3471 +1 786.493.6688
[email protected] [email protected]
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