There is a shift in the principal players within the hotel investment market in EMEA as the private equity groups and property companies who have progressively dominated this decade struggle to raise senior debt and deal with the fallout of the credit crunch. The market is now opening to other categories of buyers previously forced out due to more aggressive ‘loan to value’ players. Developers have also reduced their influence as the future demand side economics have become more uncertain and they have been forced to focus on managing their existing portfolios.

Rob Seabrook, Managing Director of Jones Lang LaSalle Hotels EMEA commented: “Amidst all this doom and gloom it is worth noting that the sales volume achieved in the first half of 2008 is still ahead of that achieved in 2004, which was a record year at the time. The market conditions are also providing an opportunity for some new and older, long-term investors to return to the marketplace where they have been uncompetitive for the last two or three years and selectively pick up the one or two deals which are more appropriately priced. We anticipate that this trend will continue and pick up speed over the coming months.”

As has been highly publicised, the Middle East has emerged as the major geographical source of investment since January, accounting for 30% of the total hotel investment volume compared to 12% during the same period in 2007. Driven by a strong desire to diversify from their natural resource based wealth, many Middle Eastern countries have set up Sovereign Wealth Funds (SWF’s) tasked with creating balanced investment portfolios.

In the face of continued, if not increasing difficulties with the financing markets, it seems likely that the second half of 2008 will mirror that of the first half, with limited activity primarily being driven by lowly leveraged, long term investors looking to selectively improve their portfolios through strategic and opportunistic acquisitions that would not be available in more buoyant market conditions.

The firm believes that there are many investors readying themselves for this scenario with various groups raising equity funds and tracking market movements. When this will happen however is extremely difficult to tell; various groups are predicting an improvement in liquidity in early or late 2009, and some are even predicting difficult times until 2010.

Rob concluded: “It seems difficult to imagine that some level of stability and direction will not have been reached within the banking world during the next six months and as such we would predict an improvement in liquidity and transaction volumes towards the second half of 2009. While it is hard to predict when the markets will bottom out and start functioning more effectively once more, one can however, be certain that by the time the market knows about it, the best opportunities will have gone.”