The latest Hotel Investor Sentiment Survey from Jones Lang LaSalle has revealed that investors are remaining optimistic towards the hotel and leisure sector, and this will cause investment to strengthen for the rest of the year.
The report highlights that trading expectations are set to remain positive until at least 2015, with the average capitalization rate requirements being estimated at 7.1 per cent. This is very close to the seven per cent levels recorded in 2007 before the global financial crisis hit.
Short-term trading remains positive for London, but many analysts are suggesting that a lack of supply in the city may hinder investor demand. Predictions remain positive for other large European cities such as Paris, Berlin and Moscow. Investors revealed in the survey that certain cities are more attractive across Europe to invest in, such as Moscow (45 per cent) and Istanbul (38 per cent), while 'hot spots' included Milan (82 per cent) and Dublin (78 per cent).
Jones Lang LaSalle’s Jonathan Hubbard said: “Our analysis shows good prospects in both the short and medium term, which is encouraging, given it has been a challenging and competitive environment so far this year."
Mr Hubbard went on to use Dublin as an example, suggesting that even though there were no major transactions made between 2008 and 2010, activity has boosted in the last 12 months. Revenue Per Available Room (RevPAR) has actually grown there by a yearly average of nearly 12 per cent since 2010. The UK is generally attracting strong interest from investors who, despite being uncertain about the short-term, are confident in mid-term growth.
As cap rates continue to fall, there are signs that there is a real growing confidence in the market, from both domestic and oversea buyers.