First half of year sees European hotel deals soar

European hotel transactions at this point are just showing off. According to JLL, transactions in the region surged an impressive 85 percent in the first half of the year versus the same time last year to €13.2 billion. Most of the action occurred in the UK, which accounted for nearly 50 percent of all hotel deals in the region.

Half-year volumes for hotels in the UK reflect a whopping increase of 172 percent on the previous year. In Germany, sales rose 60 percent to €1.4 billion.

Single-asset and portfolio transaction have been heady in the first half. The largest portfolio deal to date was the April sale of 29 Accor hotels in Germany and the Netherlands as part of a sale and franchise-back deal to Event Hotel Group for €150 million, while the Marriott in Munich was an example of a handful single-asset deals completed in the first half of 2015.

According to JLL, private equity and investment funds, particularly from North America, continue to actively target European hotel investment opportunities.

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In the first half of the year, UK regional portfolios proved attractive to North American private equity and investment funds having transacted over €1.1 billion (57 percent of all regional UK portfolio deals in the UK) during this period.

Lone Star Funds has been the most active investor in the UK having spent around €1.7 billion on more than 13,000 rooms in London and regional locations already this year.

"It is of little surprise to those in the market that private equity and investment funds are continuing to target European hotels. This is a market where yield and visitor base is consistently strong and we are now seeing this type of investor further gather in confidence and start to look beyond the major city hubs and invest in periphery markets and in regional centres," said Christoph Härle, CEO EMEA JLL Hotels & Hospitality.

Chinese capital coming
Not unlike U.S. investment, the Chinese are also targeting EMEA, according to Härle, who said, "A red-tape-laden approval process for overseas investments previously hindered Chinese investors investing more than $100 million overseas. But since China’s Ministry of Commerce has changed the rules, they have effectively changed the game."

Earlier this year, JLL predicted that Chinese capital is expected to represent some $5 billion in global hotel investment. As an example, in March, Starwood Capital Group completed the sale of Louvre Hotels Group China's Jin Jiang International for €1.3 billion.

What about Greece?
Meanwhile, as Eurozone heads work with the Greek government to save the country from financial collapse, commenting on the recent debt crisis in Greece, Härle said, "Protecting the tourism industry in Greece will be important for those sitting on both sides of the table in Brussels. Tourism is one of the main sources of earnings for the debt-ravaged economy and last year contributed to nearly 10 percent of Greece’s gross domestic product."

JLL makes the case that Greece is a perfect place for opportunistic investors to enter a market that will go through a recovery once a positive settlement is reached in Brussels. "Once agreement is reached there should see confidence returning to the tourists and lending banks alike which will helpful to investors looking to acquire assets," Härle said.