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A global hotel investment spree will likely propel volumes for the European sector beyond the €20 bn mark for the first time in the history of the asset class, recent research shows.

JLL and CBRE have recorded $9 bn and $10.7 bn (€8.1 bn and €9.7 bn) of investment transactions in the European hotel sector for the first six months of 2015.

In its latest update on the market, CBRE said it expects to see H2 volumes match or even exceed its H1 figure of $10.7 bn.

Already, it said, the H1 figure was 85% of the total level seen in 2014, representing a €4.77 bn and 80% increase year-on-year. Last quarter alone (Q2), transactions reached €5.6 bn, up 39% on the same quarter last year.

'Taking into consideration the figures to date, pipeline of activity and historical deal trends, we are set for a record-breaking year,' said Joe Stather, information and intelligence manager EMEA at CBRE Hotels. 'The €20 bn threshold seems within reach and would set an unprecedented benchmark for European hotel investment; a realisation that the asset class is becoming progressively mainstream.'

The institutional appetite to invest in core real estate has heightened considerably thanks to low interest rates and the associated impact on bond yields, according to the CBRE report. Countries where the hotel landscape was considered to be further along in the cycle, such as Germany, France and the UK, continue to register mounting deal volumes, attracting significant institutional interest and a growing weight of Asian capital.

Global record
JLL, in its latest hotel report, noted that 2015 will be a record year for foreign investment into hotels globally. Some $42 bn of hotel assets changed hands globally in H1 alone. Investors are looking from East to West: the Americas region was up 73% y-o-y in the first six months, with EMEA up 55% and Asia Pacific down 6%.

Whilst American private equity funds remain the largest source of capital flowing into hotels, H1 2015 saw a significant rise in transactions involving Mainland Chinese and Middle Eastern investors, who allocated $9.8 bn to hotels globally, up from $2.3 bn during the same period last year.

'One of the biggest trends of 2015 is the surge in Middle Eastern and Mainland Chinese investment into hotels globally. This is despite some underlying concerns across the globe, such as the Greek debt crisis and the recent fluctuations in the Chinese stock market,' said Mark Wynne Smith, global CEO JLL Hotels & Hospitality. 'At the start of the year we predicted full-year global hotel transaction volumes of $68 bn. We've achieved 60% of this already in the first half of 2015 and, if momentum continues in the second half of the year, we could surpass our forecast.'

Popular portfolios
In terms of cross-border hotel transactions, EMEA received the largest amount at $9 bn in H1, JLL said. 'Portfolio sales are increasingly popular in EMEA and accounted for 65% of the total transaction volumes,' commented Wynne Smith. 'This tells us that investors are looking for scale in what's becoming a very competitive market.'

The largest portfolio deal in Q2 2015 was the sale of the Maybourne portfolio in London to a Middle Eastern investor for $2 bn.