This optimism is fueled by accelerating capital markets, favorable supply and demand balances and strong investor appetites. Even amid geopolitical instability, the emergence of new health concerns and stagnant economic growth in certain regions, the global hospitality industry thrives in a cycle of accelerating growth, and optimism prevails in most markets.
Over the next 12 months, further gains are anticipated. Major industry players are seeking to strategically deploy and optimize their capital investments, and strong investor appetites, coupled with the availability of flexible and creative capital sources, will fuel demand for hotel acquisitions. Furthermore, the continued increase in cross-border capital flows will intensify competition in gateway markets among traditional financial investors, presenting new financial and tax implications for both domestic and foreign investors.
Appetite for investment: the current capital climate. The rising availability of hotel development financing in mature markets will allow for more robust pipelines; assets in secondary markets will attract further interest from developers; and Asian investors, private equity funds and REITs are anticipated to remain motivated buyers. Barring any shocks to the system, the climate for hospitality capital markets activity should remain favorable. For several years, confidence in the economy and in deal markets has improved. The recent surge of mergers and acquisitions activity appears reminiscent of 2007. But the way the available capital is channeled reflects the lessons learned since the financial crisis.
Overseas capital accounted for 41.2% of 2014’s global hotel investments compared to 34.7% in 2013. Asian investors represented 43.2% of the cross-border hotel transactions, and the flow of money from Asia into the mature markets of North America, Europe and Australia is anticipated to keep rising.