‘Make hay’ in sunny hotel climate, experts say
05 NOVEMBER 2014 9:18 AM
Global hotel investment remains bullish, and new development opportunities are present across Africa, said panelists at World Travel Market.
LONDON—Speaking at the World Travel Market this week, Russell Kett, chairman of HVS, wondered aloud why spectators always look for the next macroeconomic black swan whenever the hotel industry is doing well.
At a Tuesday session titled “International hotel investment and development,” Kett reeled off a list of the possible harbingers of doom, including interest rate increases, high bid-to-ask and loan-to-value ratios, overzealous valuations egged on by owners and tetchy investors previously unable to place capital and now deciding to move it elsewhere.
But all are moot, he said, because the situation right now is good and long might it stay that way.
“Make hay when the sun shines,” Kett said. “We shall expect and see more growth in Europe, and on the back of that revenue per available room should grow, too.”
Jon Hubbard, head of investor services, Europe, Middle East and Africa, in JLL’s hotels and hospitality group, backed up Kett’s summary with strong numbers. Globally, 2014 has seen $55 billion of hotel investment, up approximately $4 billion from 2013. In Europe, investment for the full year is expected to increase to $18 billion from 2013’s $14 billion.
“All is positive, and I see more coming in. Private equity now is beginning to look at quick exits due to the uptick in business and yield compression,” Hubbard, the seller on the panel, added.
Dominic Seyrling, senior director of acquisitions of Host Hotels & Resorts and the panel’s lone buyer, was happy to meet Hubbard somewhere in the middle.
“We’re selling more than we are buying as capital is available and, as (Hubbard) said, equity is chasing product. The banks are back. Public equity will generally only be in the mix if debt is available, and if they are, they will be pretty hard to beat (to the deal),” he said.
Seyrling said trophy hunters from the Middle East and Asia have not stopped searching for assets either.
Time for Africa
There was also a developer on the podium, Hilton Worldwide Holdings’ Patrick Fitzgibbon, senior VP of development in Europe and Africa, who moved the conversation from now to the future, with that future being Africa.
“In Africa there is a massive shortage of product, while airlift in the continent is growing exponentially, and globally it is seeing the largest positive gross domestic product, albeit starting from a low base. Some predict that Nigeria will have a larger population than the United States by 2050,” he said.
Fitzgibbon added that Hilton is constructing modular hotel rooms and shipping them to Africa to make up for the shortage of infrastructure, materials and expertise in Africa that he said all would improve.
“The superstructure and public areas would still be built in Africa,” he said.
HVS, according to Kett, is to open an office in Africa by the end of 2014.
“Our problem is keeping up with the challenges (of Africa),” he said.
“The opportunities in Africa are where the barriers to entry have been recognized and dealt with. Angola comes to mind as somewhere that has not done this,” Kett added.
The panelists agreed that the PIGS nations of Portugal, Italy, Greece and Spain would see more investment transactions—but only if asking prices remain relevant.
“There is an underlying idea that land values in such places now have to be bid up,” Hubbard said. He said the same was true of Egypt, which the panelists agreed is still being held back by ongoing commotion in its capital Cairo.