JLL's Global Hotel Investor Sentiment Survey Suggests Heightened Optimism As the Sector Continues to Recover

JLL’s Hotels & Hospitality Group announced today results from its annual Global Hotel Investor Sentiment Survey and reported investment activity for the first half of 2021 at $30 billion, inclusive of entity-level deals, with a gust of optimism for the industry as investors show signs of increased activity.

Global investor sentiment overview

This level of sales volume represents a strong increase of 66% year-over-year and only 4% less than activity observed in the first half of 2019. With 2021 very much a year of two halves, the pace of investment activity is expected to accelerate throughout H2. Over half of investors responded they will implement a more aggressive investment acquisition strategy in 2021, as they become more forward-looking, with 29% of respondents indicating interest in over $200 million worth of assets, up from 25% during the onset of the pandemic.

Hotel investors have their sights on Europe, North America and Southeast Asia as activity picks up. In particular, Asia Pacific hotel transactions totaled $3.7 billion in the first half of 2021, with a significant level of institutional investor funds flowing into hotel assets. With wider vaccine rollouts, North America’s market is opportunistic, with domestic travel continuing to increase and drive-to leisure markets experiencing a flurry of travelers. Investors eyeing European assets are encouraged by the increasing vaccination rate, with many expanding their strategies to consider less dense markets, with the diversification of assets being top of mind.

In addition, investors’ sentiment suggests that full-service hotels will endure the deepest discounts, as select-service and economy hotels were less impacted by the pandemic and still able to fill rooms. In fact, nearly 50% of respondents expressed that the best investment opportunities to emerge over the next six months will be full-service hotels.

Last year, navigating a zero or negative cashflow environment coupled with a high degree of uncertainty surrounding the lodging industry’s recovery profile, posed various challenges for investors underwriting hotel acquisitions. This resulted in 2020 surveyed cap rates increasing an average of 120 basis points globally when compared to 2019. In 2021, investor cap rate expectations compressed an average of 30 points globally, driven by a decrease in the Americas and in Europe.

Key priorities for the remainder of 2021

With 70% of respondents anticipating their property or portfolio RevPAR to return to 2019 levels in about three to four years, investors are keen on operational changes and re-evaluating strategy. An imperative function of business that has gained enormous spotlight during the pandemic is asset managers. That said, investors indicated the following to be key operational focus areas:

• Profitability improvement measures, such as service and amenity offering evaluations and labor optimization.

• Sustainable operation programming and enhanced focus on ESG.

• Guest-facing and back-of-house technology implementations.

Read the full report here.

JLL’s Hotel Investor Sentiment Survey has been referenced by the global hotel investment community since its inception in 2000. Responses for JLL’s most recent survey were collected during May and June 2021. This survey represents a compilation of 7,800+ data points from hotel investors on future hotel operating performance expectations, yield requirements and future cap rate trends.