CHICAGO—As the world continues to find a new normal post-COVID, consumers have placed heightened importance on travel and experiences, which has accelerated lodging demand and resulted in RevPAR reaching or exceeding 2019 levels in some markets. According to JLL Hotels & Hospitality Group’s latest Global Hotels Investment Outlook, even with global inflation and geopolitical tensions, the industry should expect to see investors deploying capital across a range of lodging verticals to capture an increased share of a traveler’s experience.
The Global Outlook
Despite geopolitical and macroeconomic headwinds in the back half of 2022, two of the three global regions saw increased hotel investment volume in 2022—the Americas and APAC. Global hotel investment volume reached $71.9 billion, only a 2 percent decline relative to 2021.
While global portfolio transactions declined slightly, all three regions benefitted from strong single-asset activity, specifically within the luxury and select-service sectors. The select-service sector accounted for 34 percent of single-asset global investment volume, its highest proportion ever, with the Americas and EMEA seeing notable growth.
Private equity continues to be the largest acquirer of hotel assets globally. The year 2022 also saw an increase in new investors entering the sector; in fact, 16 percent of the year’s global investment volume was generated by first-time hotel buyers, predominantly comprised of family offices and high net-worth individuals.
Entering 2023, investors should keep a few key themes in mind:
- Continued disconnect between accelerating hotel fundamental performance and macroeconomic headwinds. Despite global economic volatility, labor shortages, and supply chain disruptions, the global lodging industry was largely boosted by leisure demand and international tourism events in 2022. In fact, global hotel occupancy reached 89 percent recovery relative to 2019 levels. Additionally, unlike other property sectors, hotels can modify their selling rates daily to account for rising inflation. As such, global hotel ADR exceeded global inflation by 70 basis points in 2022. With demand showing no signs of slowing hotel owners can likely push rates even further in some markets with the goal of increasing profitability.
- Re-emergence of international travel and opportunities for cross-border hotel investment. An estimated 700 million tourists traveled during the first three quarters of 2022, an increase of 133 percent compared to the same period in 2021. As travel restrictions continue to ease and international borders reopen, the industry can expect to see a continued increase in travel demand. With the reopening of borders, the industry should see more cross-border investment opportunities, particularly in safe-haven markets such as London, New York, and Singapore with capital originating from Asia, Europe, and the Middle East.
- Redefining hospitality with a renewed focus on owning the entire travel experience. A focus on work-life balance and authentic travel experiences has led to the emergence of new lodging demand segments as travelers look to spend time in new places. This has created opportunities for investors and hotel brands to expand their offerings into new verticals, such as alternative accommodations, to increase their share of the travel experience.
In the face of ongoing supply chain disruptions and global headwinds, the global lodging industry remained resilient in 2022 with fundamental performance nearing a full recovery. China’s long-awaited reopening will fuel even further growth, with global investors likely to re-enter the mix. Rising debt costs might be top of mind for most investors entering 2023; however, those that remain nimble will have opportunities to acquire quality assets and grow their portfolios. The systemic and societal changes caused by the pandemic present an opportunity for hotel investors to create tech-forward innovative products and new experiences that appeal to today’s travelers.