Global Hotel Deals Fall On Credit Squeeze

Source : The Business Times, May 22, 2008

Decline of 60% to US$8b in Q1 2008, says report from Jones Lang LaSalle

(TOKYO) Global hotel acquisitions dropped more than 60 per cent in the first three months of the year as credit tightened after losses and writedowns related to the United States sub-prime mortgage collapse, Jones Lang LaSalle Inc said.

Hotel investment fell to about US$8 billion in the first quarter of 2008, after exceeding US$20 billion year earlier, according to a report by Jones Lang LaSalle, the world's second- largest real estate broker.

'We are expecting to see a further decline in buying intention and an increase in holding intention,' said Arthur de Haast, chief executive officer of Jones Lang LaSalle Hotels, said at a conference on Tuesday in Tokyo. 'This is just reflecting the fact that there is very limited liquidity in debt markets.'

Global real estate financing has evaporated as defaults by US homeowners saddled banks and securities firms with more than US$379 billion of losses and asset writedowns worldwide. That has slashed demand from investors for hotel properties, according to a survey conducted by Jones Lang LaSalle.

'Hotel owners are preferring to hold their assets and buyers are waiting to see in which direction the market is going to move before they start buying again,' Mr de Haast said.

Few hotel transactions were completed in the first quarter of 2008 because of the tightening debt market from the end of 2007, according to the Jones Lang LaSalle report.

Rising borrowing costs, which affect a buyers' ability to pay higher prices, mean hotel prices in Japan should fall, Gregory Stuppler, managing director of Starwood Capital Group said at the hotel investment conference organised by Jones Lang LaSalle.

Mr Stuppler said that he would offer 25 per cent less for a hotel than a year ago.

Global hotel investment in 2007 surged 52 per cent to a record high of US$110 billion, the Chicago-based firm said.

Jones Lang Hotels advises on transactions in the hotel industry as well as on appraisals and raising capital. -- Bloomberg