Rebounding gateways will lead transaction charge: JLL

GLOBAL REPORT – The average H1 2024 RevPAR recovery for the top 10 most liquid hotel markets outperformed the global average by 460 basis points as investors inject increased capital into high-growth markets, according to JLL Hotels & Hospitality research.

As a result, JLL said it expects transaction activity to accelerate further in high-performing markets over the balance of 2024 and into 2025 with urban gateway cities likely to be the largest beneficiaries of capital as group, corporate, and international travel continue to strengthen.

Looking closer at individual market performance, Zach Demuth, JLL’s global head of Hotels Research told Hotel Investment Today that Paris, akin to other European gateway markets, has been performing exceptionally well over the past 12 to 18 months. He said the market has benefitted from robust inbound international travel buoyed by the strong U.S. dollar as well as continued growth in domestic European travel (both leisure and business).

Demuth added that RevPAR outperformance fuels liquidity (generally speaking) as sellers look to capitalize on past performance and buyers look to leverage high-growth markets. “The driving force for outperformance varies by market though we’ve seen a surge in urban performance this year fueled by the return of corporate, group, and international travel, much of which was slower-to-recover in the immediate aftermath of COVID,” he said.

Asked if there could be a “fly in the rub” of the scenario that suggests more deal activity coming to stronger-performing urban markets, Dumuth said, “We have relatively strong conviction that transaction activity will meaningfully accelerate in the coming months driven by falling global debt costs – we’ve already seen the positive impact this had across Europe and parts of Asia, and expect to see similar in the U.S. following the Fed’s anticipated upcoming moves.”

He added that there are some growing concerns that RevPAR growth may slow, underpinned by contracting consumer savings, slower economic growth in China, and ongoing geopolitical instability. “Despite the possibility of this scenario, our belief is that transaction activity will strengthen regardless,” he continued. “Investors will likely target gateway markets to deploy capital given their long-term stability and ability to mitigate possible leisure travel slowdown since they cater to more diversified demand segments.”