Global hotel sales up 56% in H1 2015, totalling US$42 billion

The sale of The Waldorf Astoria in New York for $1.95 billion closed this year
The sale of The Waldorf Astoria in New York for $1.95 billion closed this year

Hotel sales across the globe soared in the first half of 2015, with transactions adding up to US$42 billion in total. According to JLL Hotels & Hospitality Group, this sum represents a 56% increase in money spent, when compared to the same period last year.

The boom is being attributed to an increase in interest from both Asian and Middle Eastern investors. However, the amount still falls short of the US$62 billion record set in the first half of 2007.

The surge in hotel activity this year reflects a willingness amongst investors to take greater risks in search of higher yields as interest rates remain incredibly low. Hotels typically generate higher returns than traditional real-estate assets like offices or retail space.

“Institutions are getting more comfortable acquiring hotels, and the hotel market is benefiting from that,” said Mark Wynne Smith, chief executive officer at JLL Hotels & Hospitality.

The sales were in part driven by a selection of sovereign-wealth funds and corporate investors entering the hotel market for the first time or increasing their exposure.

Chinese insurers have featured in two of the most prominent deals to close this year: Anbang Insurance Group Co. paid $1.95 billion for the Waldorf-Astoria hotel in New York, while Sunshine Insurance Co. spent $230 million to acquire the Baccarat Hotel in Manhattan. The price per room for the Baccarat of about $2 million was a record valuation for a U.S. hotel.

Falling oil prices also have encouraged Middle Eastern investment funds to diversify through property holdings abroad. Qatar Investment Authority in April bought a trio of high-end London hotels—Claridge’s, the Berkeley and the Connaught—for $2 billion.

Overall, investors from Asia and the Middle East spent $9.8 billion on hotels in the first half of the year, compared with $2.3 billion last year.

The $24 billion invested in U.S. hotels represented a 73-percent increase from the same period last year, while hotel sales of $15 billion in Europe, the Middle East and Africa rose 55 percent.

Source: The Wall Street Journal