Few willing sellers in the EMEA hotel market
Trading expectations show ray of hope for hotel investment market
A marked decline in short term trading expectations has occurred across all cities in EMEA, with the lowest expectations reported for cities in Central Eastern Europe (CEE) and the UK. CEE, which initially proved resilient to the financial downturn, now looks set to face a more severe recession compared to Western Europe. With global tourism expected to fall substantially, investors are expecting hotels performance to decline in coming months, in particular for markets which have experienced substantial supply growth in recent years, notably within the MENA (Middle East North Africa) region.
Medium term trading expectations have improved for almost half of all cities tracked in comparison to the last survey in October 2008, the majority of which are located in Western Europe. Cuts in interest rates, quantitative easing measures and a sense that we are approaching the bottom of the market appear to be the reasons behind this conclusion.
Yield requirements continued their upward trend and increased on average by 120 basis points since the last survey in October 2008. The softening of yields was most notable in Spain and the UK, but was less severe in other western European countries such as Germany and remained lowest for key gateway cities. Wynne-Smith continued: "With yield requirements reaching an average 9.2% for the region, investors have become very risk-averse and are currently favouring a return to the comfort zone of their home markets.
Going forward, sentiment appears unlikely to worsen markedly and the positive signs appearing in the US equities market could indicate that the bottom of the market is in sight but the responses do not suggest that the reaching the bottom of the market will necessarily mean the start of a period of recovery. "We expect to move into a period of stabilisation starting in the last quarter of 2009 but the coming six months are crucial in determining if the month on month percentage falls will generally reduce in size" concluded Wynne-Smith.