Hotels Industry Witnesses Recovery Signals

May 14, 2009	(Be the first to rate this story!)  Loading ...
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Hotel investors are returning to the market but mega multi-use projects are no longer financially viable, say senior executives. “Early signs of investments coming into the market were seen in April, especially in India, the Middle East, North Africa and Asia,” James Kaplan, a Senior Vice-President at Fairmont Raffles Hotels International, told Emirates Business. “The US is still down because of over-supply [of hotel rooms].” Arnaud Andrieu, Vice-President of CBRE Hotels, said: “Growing interest from international and experienced hotel investors is clearly perceptible. “They are looking for distressed existing hotel properties that offer strong fundamentals. Investors will then seize the opportunity to reposition outdated or inefficient products while putting in place strong and innovative asset management strategies by mainly optimising operational processes with an accent on revenue management.”

Kaplan, who is responsible for his group’s development in Europe, the Middle East and Africa, said interest in Europe was focused on smaller projects. And he said the day of mega multi-use projects was clearly over because it was difficult to obtain financing for them. “This is specially so for projects that have a residential component,” he said. “We are now back to more conservative financing models.” Andrieu said: “Regarding hospitality development projects, investors are more than ever sensitive to realistic and tangible investment criteria, and are, therefore, focused on the supply-demand balance and following a ‘top down’ market analysis approach.

“For instance, our Middle East hotel department today holds a stronger position in North Africa where niché markets are still unexplored. Mega multi-use projects are not as attractive as they used to be. However, it is important to mention that most international investment banks and investment houses such as Bank of America and Morgan Stanley have recently entered a recapitalisation period and are looking for fresh equity. “This could be a sign of recovery for the financing and credit markets, which will definitely allow us to see a bottom in the real estate investment industry and enable professional investors to execute their business plans normally.” According to an Ernst & Young report titled ‘Top 10 Hospitality Trends in 2009′, “in the past, many hotel development sites were developed by underwriting projects with residential components supported by the then-burgeoning residential market. However, with investors’ market confidence waning and credit conditions tightening, there was a shift from this trend as several hotel and condominium mixed-use developments were put on hold at the end of 2008.

“In the current economic environment, the emerging limited-service ‘lifestyle’ brands may offer alternatives aligned with developments containing office and rental apartments, which better suit the changing market fundamentals.” Limited-service lifestyle brands are expected to be more prevalent in the next two to three years because they offer a less costly hotel product alternative, adds the report.

News Published Under:   Hotel Industry in India |

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