Increased foreign investment expected in US in 2010

espite being battered by one of the worst slumps in history, the U.S. hotel sector should expect to see an increase in foreign investment in 2010, experts said.“There hasn’t been so much foreign investment in the U.S. over the last couple of years because there has been such strong liquidity in local markets,” said Mark Wynne Smith, CEO for EMEA in Jones Lang LaSalle’s London office. “If you can sell your hotel to someone in the next town you know well, why would you sell your hotel to someone 2,000 miles away you do not know well?

“Clearly,” he added, “the situation has changed.”

Sources of capital

The US$307-million deal for Interstate Hotels & Resorts that was struck 18 December by a joint venture that included Shanghai Jin Jiang International Hotels (Group) Company Limited is an example of the increasingly global nature of hotel investments. But banking and real estate experts said the field of players for American assets will be larger than just Asia.

“There are hotel companies that bill themselves as worldwide hotel companies that don’t have a presence in the United States,” said Daniel H. Lesser, senior managing director-industry leader at CB Richard Ellis in New York. “I think the U.S. offers real ripe opportunities.” He added he expects to see a wide range of investments, including in entities and corporations as well as single, physical real-estate assets.

Europe and the Middle East also are likely to get involved, Wynne Smith said.

“Middle East investors have been out of the market. They’re starting to look again,” he said. “There’s not a huge amount of capital coming from the Middle East, (however). These guys are really, really savvy about what they should be paying.”

Those contacted for this story were hesitant to say which specific groups might be considering U.S. investments.

M. Chase Burritt, managing partner of consulting firm Burritt Associates LLC in Fort Pierce, Florida, identified the U.K., Germany and Spain, along with the Middle East, as potential investors.

“The foreign investment in U.S. hotels is typically concentrated in major markets or in brands or premium properties,” he said.

Global view

The global view of the U.S. hotel sector is positive, Wynne Smith said.

“Countercyclically, your pricing is at or near the bottom and recovery prospects are reasonably good,” Wynne Smith said. He sees recovery in the U.S. hotel space occurring during the next four or five years.

The U.S. market might be showing the first hints of a recovery. The latest Smith Travel Research data show that for the first time since the week ending 20 December 2008, two of the three key metrics—occupancy and revenue per available room—finished in positive territory. For the week ending 2 January 2010, occupancy increased 5.9 percent to end the week at 45.5 percent, and RevPAR finished up 1.6 percent to close the week at US$45.37.

Lesser said hotel investments have proven to be a solid guard against inflation, which also might spark interest, especially among venture capital firms.

“They’re looking for a return and hotels, on a long-term basis, tend to provide superb risk-adjusted returns,” he said.

He added, “Hotels are a terrific hedge against inflation because you can reprice the rooms every night.”

There is an upbeat attitude being shown toward the U.S. by outside groups, despite the economic troubles that have occurred during the past 18 months, Lesser said.

“At the end of the day, this shows that the United States is still one of the safest places to put your money,” he said.

Posted by admin on Jan 12th, 2010 and filed under Hotelnews. You can follow any responses to this entry through the RSS 2.0. You can leave a response by filling following comment form or trackback to this entry from your site

Leave a Reply