Q4 2015 EMEA market intelligence
Recent findings from JLL suggest that the EMEA hotel market is booming. Hamish Kilburn reviews the latest research and predicts where the next hotspot in hotel development is likely to be…
With new influences having sizeable impact on the supply and demand of future hotel development, 2015 has been a dramatic year in the hotel sector in EMEA. Earlier this year JLL reported, “transaction volumes rose 55 per cent in H1 2015.” As a whole, EMEA has exceeded markets compared to previous years, but it’s worth noting that not all countries have witnessed the same positive growth – local, political and geopolitical events have been a contributing factor that has dampened supply and demand for hotel developments in certain areas.
Tourism and demand
Tourism continues to be one of the most significant factors in hotel investment. London remains one of the most visited cities globally. Paris on the other hand, following the terror attacks in January, recorded a 2.9 per cent fall in international overnight stays in May 2015. It was also widely reported that the hotel industry is under significant threat from rival accommodation sites such as AirBnB, and Paris is one of the hardest hit areas, with popular headlines claiming that AirBnB had more rooms in the city than hotels. However, F&B facilities continue to improve and the luxury sector has been less hit due to the highly-aspirational experience on offer.
Throughout the year, Istanbul has been a region of ambiguity in the market, which was highlighted by the distressed post-election period. Recuperating well, in June 2015 YTD international visit or arrivals grew 5.5 per cent compared to the same period in 2014.
Further afield, outside Europe and the Middle East is on the tourist map. In the first half of 2015, the Dubai saw 900 new rooms built. According to recent reports by JLL, the volume of passengers at Dubai International Airport grew during the first five months of 2015 by nine per cent compared to the same period in 2014. Other areas of interest are Abu Dhabi, which has many hotel plans in the pipeline.
Recovering from oversupplying due to favourable trading conditions and the FIFA 2010 World Cup, Johannesburg is expected to make a sustainable recovery with internationally branded mid-scale and upscale hotels to take the lead.
Investment predictions for 2016
Dubai continues to be at the forefront of worldwide hotel development. The ambitious plans to build 21,600 new rooms by the end of 2017, means that new projects are being as it continues to be one of the most prosperous areas internationally for hotel investors. The majority of future hotel development plans are that of the upper-upscale and luxury segment.
On the other end of the scale, Moscow has few open market deals and JLL quotes in a recent report as the situation being “about as bad as it could possible get,” not helped in any way by the exchange rate. Although rates in US dollars being now half of what they were, the city is somewhat of a bargain for Western European guests. However Russia’s strong political agenda is what is putting many potential tourists off and for that reason the outlook heavily depends almost entirely on politics, which as ever is hard to predict.
JLL predict that new supply in Johannesburg should come into the market from 2018 onwards, predicting that the city’s hotel market will have a more sustainable pace than in previous years.
Western Europe remains on the wish list of investors from across the globe. Cash-rich investors from Asia Pacific and the Middle East, in particular are keen to secure their footprint in London. In addition, London’s infrastructure plans for the Thameslink programmes, cross rail, One Nine Elms and Battersea Power station makes the Capital City even more appealing.
Although Paris’ terrorist attacks earlier in the year had an effect on tourism, there is no denying the fact that in the first half of 2015, hotel investment volumes in Paris increased by 150 per cent compared to the same period in the previous year. Further more, in the Summer 2015, three new infrastructure projects were announced and granted building permits. Hermitage Tower, Samaritaine and Tour Triangle are expected from the “Reinventor Paris” competition. Statistics suggest that the outlook for hotel performance in the city in the medium to long term remains promising.
The tourism and hotel market in Istanbul has witnessed a slowdown since 2013. Combined with local and regional political and geopolitical events, The Turkish Capital brings with it uncertainty. However it remains an attractive location for both foreign and domestic investors. It is becoming more of a popular destination for tourism (up by 6.2 per cent in 2014) and with GDP expected to rise to 3.7 per cent in 2016, it’s also a rising international business hub.