September 2008 VOL. 2

Foreign Exchange

Hotel investment volumes fell dramatically during the first half of 2008, with only $13.9 billion worth of hotels trading hands globally, according to a recent report from Jones Lang LaSalle Hotels. This amount reflects a decline of 76 percent from the record levels seen in the same period of 2007.

"Whilst transaction activity has shown a marked decline from the historical highs achieved over the last two years, we are still cautiously optimistic about the future of hotel investments over the medium term," says Jones Lang LaSalle Hotels’ Global CEO Arthur de Haast. "At $13.9 billion, hotel investment volumes are now at a level comparable to that of 2004, which similarly recorded $14.0 billion worth of transactions within the first half of the year."

By region, the largest drop was recorded in the Americas (down 81 percent), followed by Asia Pacific (down 67 percent) and EMEA (down 59 percent), although the Americas remains the most liquid region, accounting for more than $6.0 billion of transactions during the first half of the year.

"More importantly, transaction volumes are still significantly higher than those achieved in 2002/2003, which remains the lowest point for the industry in this decade," adds de Haast. "Following the events of September 11, 2001, the Iraq War, and the SARS outbreak in 2003, transaction volumes sunk to a low of $3.6 billion in the first half of 2002 and remained weak through the end of 2003. Based on year-to-date numbers, the hotel investment market in 2008 appears to be in a much stronger position relative to the 2002/2003 period."

Beyond transaction volumes, Jones Lang LaSalle says the hotel investment market is also witnessing change in other respects. Reflecting the reduced availability of debt, the majority of hotel transactions (84 percent) that have closed have been smaller than $100 million. Compared to the first half of 2007 where more than a dozen portfolio transactions of over $1 billion took place, only one such transaction has been recorded for the first half of 2008.