Hotel assets remain in vogue, but investors cite borrowing
costs (52%), labor costs (44%), and construction costs (26%) as biggest
challenges.
GLOBAL REPORT - More than half of 300 hotel investors worldwide surveyed by
CBRE Hotels Research said they intend to buy more in 2024 than in 2023, while
on 14% expect to buy less.
The data published this month cite investors who expect
higher return, price adjustments, distressed opportunities and a lower cost of
capital.
Nearly 75% of respondents say they are most attracted to opportunistic
and value-add assets.
In the U.S., upper-upscale and upscale/upper-midscale are
the most popular asset targets. Canadian investors prefer lower- and
middle-priced tier chain scales, while higher-price tier properties are
preferred in Europe, Mexico, Central America and the Caribbean. Upper-upscale
properties are the most popular investment space among Asia Pacific investors.
We believe the percentage of intra-regional investors (i.e., U.K. investments in Spanish or French hotels) is considerably higher. Given the positive sentiment among investors, CBRE Hotels Research expects that the cross-border capital share of total global hotel investment will increase in 2024.
CBRE
Resorts are the most attractive property type for investors
in the U.S., Mexico, Central America and the Caribbean. Central business
districts are preferred submarket for European and Canadian investors, while Asia
Pacific and European investors favor those in gateway cities.
Cross-boarder investment is an important source of capital
with approximately 20% of survey respondents investing cross-regionally. “We
believe the percentage of intra-regional investors (i.e., U.K. investments in
Spanish or French hotels) is considerably higher,” the report stated. “Given
the positive sentiment among investors, CBRE Hotels Research expects that the
cross-border capital share of total global hotel investment will increase in
2024.”
More than half of Americas region investors said they are
mostly targeting hotels affiliated with globally recognized brand families,
while the highest percentage of European and Asia Pacific investors said they
are mostly targeting vacant-possession hotels (vacant hotels or leased/managed hotel
that terminates upon sale).
U.S. and European survey respondents showed a preference for
hotels affiliated with global brands. However, more than half of Asia Pacific
investors said they are more likely to target independent hotels for short-term
investment.
Full-service remains the most preferred hotel concept
globally, favored by 38% of survey respondents. However, U.S. investors
expressed more interest in limited-service (40%) than full-service (32%), followed
by extended-stay (21%). Interestingly, approximately one-third of Asia Pacific,
Mexican and Central American investors favor hotel-branded residential properties.
Geopolitical risks were among the top three concerns for investors from Europe, Asia Pacific, Mexico and Central America.
CBRE
Upper-upscale and luxury hotels are the most preferred hotel
classes globally by 45% and 39% of surveyed investors, respectively. There are
some preference variances between the regions; for example, more Canadian
investors said they favor mid- and low-priced hotel classes than the global
survey average, while U.S. investors prefer upscale and upper-midscale
properties. However, all hotel classes scored high with over 50% of investors
finding them either somewhat or most attractive.
High costs remain the biggest challenge for investors this
year: borrowing costs (52%), labor costs (44%), and construction costs (26%)
were cited. Geopolitical risks were among the top three concerns for investors from Europe, Asia Pacific, Mexico and Central America.
In the U.S., gateway markets like New York City and Washington,
D.C., topped the list of cities expected to outperform this year, along with
leisure-focused markets like Miami, Charleston, South Carolina, and Austin,
Texas.
In Europe, investors favor gateway markets like London and
Madrid for strong results.
Among Mexican markets, Los Cabos, Cancun and Mexico City are
expected to have the strongest performance.