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Investors will return in force to the hotel sector in 2024, spending 15% to 25% more on hotel assets globally than they did last year, a new report by JLL Hotels & Hospitality Group predicts.
The surge will represent a recovery from an anemic 2023, when global hotel investment volume totaled only $50.5B, the lowest since 2012, other than 2020, and down from roughly $73B in both 2021 and 2022, according to JLL data.
High interest rates last year put the chill on deals, resulting in low portfolio transactions and smaller deal sizes.
“The consensus is that all three of the largest governing bodies ... will begin to cut rates at some point in 2024,” the report notes. “Perhaps more importantly, it appears that interest rates have generally peaked. This clarity is crucial for investors ... and should help spur transaction activity.”
Stronger hotel fundamentals will also whet investor appetite for hotels this year. Global revenue per available room achieved a full recovery in 2023, JLL explains, vaulting past 2019 levels by 12%.
Investors will covet “irreplaceable” luxury assets as well as select-service and extended-stay properties in 2024, JLL predicts, driven by the growth in wealth worldwide and the “continued blurring of lines between living and traveling.”
Luxury hotels will trade at a premium, while other hospitality sectors will likely experience a pricing reset, the company predicts. Investors will also focus on the usual-suspect destination cities for international travel, such as London, New York and Tokyo.
“Cities that focus on intentional tourism and leverage technology will garner long-term investor interest, with foreign capital likely to be the most acquisitive in 2024,” the report predicts.
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