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Research - OCTOBER 9, 2018

London pips New York to become most attractive city for hotel investment

by Andrea Zander

New research from Cushman & Wakefield reveals that investment in the hotel sector in London is in rude health, topping the table of leading cities for hotel investment worldwide thanks to several large deals helping to double transaction volumes, the continued confidence in London as an investment market and investment in American cities falling.

The top 10 cities for hotel investment are London ($3.27 billion); New York ($3.12 billion); Tokyo ($2 billion); Washington, D.C. ($1.92 billion); San Francisco ($1.65 billion); Phoenix ($1.47 billion); Las Vegas ($1.44 billion); Los Angeles ($1.43 billion); Paris ($1.36 billion); and Dallas ($1.35 billion).

“London has battled through political headwinds to charm both hotel investors and consumers,” said David Hutchings, head of investment strategy, EMEA capital markets at Cushman & Wakefield. “Its rich culture, history and leisure scene, alongside its business operations, is proving to be a solid bedrock for its hospitality sector, which continues to go from strength to strength.”

London has jumped from seventh position the previous year, but only narrowly takes the top spot for hospitality investment from New York. American cities dominate the top 10 despite overall investment into the region falling by 21 percent due to a cooling of capital flows into the region from Hong Kong and mainland China after several years of exceptionally strong capital deployment.

Asia Pacific and EMEA have both demonstrated sustained hotel investment growth at 28 percent, or $14.89 billion in total, and 15 percent, or $25.91 billion in total, respectively, propelled by the rise in tourism and changing consumer habits.

“We are seeing an increasing diversity amongst the type of investors coming to play, including institutional investors, whose presence in the market is reducing the risk profile and driving a surge in liquidity,” said Jon Hubbard, head of hospitality EMEA at Cushman & Wakefield. “Their presence is encouraging a resurgence in operating leases and the continued expansion of white label companies. This, in turn, has encouraged some major operators to reconsider leases for strategic situations. There is also an increasing appetite from institutional buyers to consider leases with some element of variable income, to drive upside potential and high returns.

“An endemic lack of stock will see investors broaden their outlook to noncore locations with strong fundamentals for tourism. Paris, Amsterdam, Athens and Prague will be attractive European locations, as well as Tel Aviv, Tokyo, Osaka, Kyoto, Singapore, with some localized opportunities likely to emerge in Thailand and India.”

The number of international tourists globally rose by 7 percent in 2017 and is set to continue to rise, bolstered by such factors as the rise in the silver economy, the millennial hunt for experiences and the rise of tourism originating from a more prosperous China. As the driving forces contributing to the increase in each of these tourist groups looks unlikely to wane in the near future, tourist numbers are expected to continue to increase globally.

 

 

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