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News Release

London – Moscow

Hotel operators start buying again

A mixed picture across the EMEA region draws the recent sellers back in to the market


London – Moscow, February 9, 2009 – The 2008 pan EMEA hotel transaction volume for deals above €10 million finished at €7.8bn, a notable decrease of 64% compared to 2007. 
The reduction in hotel investment activity was largely the result of fewer portfolios transacting during 2008. In particular, large corporate transactions which became frequent in recent years disappeared from the market.
 
Overall portfolio activity fell back by around 71%, whereas single asset investment volume decreased by 49%. The slowdown became most pronounced in the last quarter of the year, when hotel investment volume fell by almost 90% compared to the same quarter in 2007.
 
Mark Wynne-Smith, CEO, Jones Lang LaSalle Hotels, Europe, Middle-East and Africa said: “We do expect the 2009 volume across the region to fall to around €5bn – approaching a 10 year low - led by a significant drop in portfolio sales and further deterioration in single-asset volume. Activity will remain subdued in the first half of the year, followed by more activity in the fourth quarter.
 
“Interestingly, our research shows that hotel operators became the major buyers in 2008 as they started to realize that buying hotel properties is a good strategy by which to achieve growth in the current market conditions. This could mean the start of a complete turnaround from the debt fuelled selling trend of the last few years”, comments Mark. “If prices end up where we think they will, asset purchases do represent a fair return on capital for both public and private hotel operators”.
 
Those investors still active continue to focus on major cities across EMEA, most notably London and Paris, which are best positioned to weather the economic downturn, could recover more quickly and have had low growth in supply in recent years. Both markets have shown remarkable resilience in attracting international and domestic visitors and are likely to maintain occupancies of around 75% to 80%. Even in the face of significantly less demand, hotels in these cities continue to be the most sought-after by investors and look capable of holding their values in comparison to other cities.
2008 also saw most investors shy away from management contracts, which had been very popular in recent years – mostly as a result of the lack of debt which has driven much of the recent activity in this segment. Vacant possession and lease deals were the dominant transaction structures. 

Mark concludes “In 2009, we expect evidence of distressed assets to become clearest in Ireland, Spain and the UK. But given the diversified nature of the European community, each country will experience varying degrees of distress. In general, as with other regions around the globe, owners and their lenders will remain reluctant to sell in a troubled economic environment, unless forced by the need to refinance or for other economic reasons.”
 
Marina Usenko, Executive Vice President, Head of Jones Lang LaSalle Hotels Russia, comments: “Although international investors’ interest in hotel segment in Russia had been intensifying over the last four years, the investment market remained immature and focused primarily on Moscow and St. Petersburg, with just a handful of publicly announced hotel deals registered between 2005 and mid-2008. Considering the deep freeze of the debt markets and the natural desire of investors to buy assets in more predictable albeit lower-yielding markets, we anticipate investment activity to be subdued across the country (and the CIS region in general). This said, we still expect to see investor interest, mainly from opportunistic buyers, both foreign and domestic, who may use the chance to acquire hotel projects and operational hotels assuming the price correction allows for acceptable levels of yields”.
 
 
 
Jones Lang LaSalle Hotels
Jones Lang LaSalle Hotels, the first and leading global hotel investment services firm, is uniquely positioned to provide the depth and breadth of advice required by hotel investor and operator clients, through a robust and integrated local network. In 2008, Jones Lang LaSalle Hotels provided sale, purchase and financing advice on over $3.7bn worth of transactions globally relating to more than 120 assets. In addition, advisory and valuation services were provided on more than 600 assignments. The global team comprises over 240 hotel specialists, operating from 31 offices in 18 countries. The firm’s advice is supported by a dedicated global research team, which produced 87 publications in 2008 in addition to client research. Jones Lang LaSalle Hotels’ services span the hospitality spectrum; from luxury single assets and large portfolios to select service and budget hotels, resorts and pubs. Their services include investment sales, mergers and acquisitions, capital raising, valuation and appraisal, asset management, strategic planning, operator selection, management contract negotiation, consulting, industry research and project development services. Jones Lang LaSalle Hotels’ clients have access to the resources of its parent company, Jones Lang LaSalle (NYSE: JLL). http://www.joneslanglasallehotels.com.
 
About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specialising in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2008 global revenue of $2.7 billion, Jones Lang LaSalle serves clients in 60 countries from 750 locations worldwide, including 180 corporate offices.  The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.3 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with more than $46 billion of assets under management. For further information, please visit our Web site,  http://www.joneslanglasalle.ru
In Russia and CIS Jones Lang LaSalle have offices in Moscow, St. Petersburg, Kiev and Almaty. Jones Lang LaSalle, Russia was voted Consultant of the Year in 2004, 2006, 2007 and 2008 at the Commercial Real Estate Awards (Russia).