2/24/2012

Euro debt crisis attracts Mideast hotel investors

JEDDAH - The protracted eurozone debt crisis becomes a window of opportunity for investors in the hospitality business in the Middle East.
A good example was the recent purchase of the prestigious Carlton Hotel in Cannes on the French Riviera, which was sold for 450 million euros to Qatar-based investor Ghanim Bin Saad Al Saad.

That figure was significantly lower than the 634 million euros that Morgan Stanley paid for the Carlton in 2006. The Qatar investor is also interested in other properties of the InterContinental chain including those in Vienna, Frankfurt, Budapest, Rome, Amsterdam and Madrid. Other Middle Eastern investors have also made the headlines recently with a raft of high profile hotel acquisitions in London and Paris.

In the last two months alone, Qatar National Hotels Company (QNH) snapped up Le Royal Monceau - Raffles Paris, while late last year Middle East investors spent some $500 million buying luxury hotels The Sanderson, St Martins Lane and the W Hotel, in London.

Global hotel transaction volumes will hold steady in 2012 to reach upwards of $30 billion in deals, according to recent figures released by Jones Lang LaSalle Hotels, in line with 2011 figures, which were up 13 percent from 2010. Hotel investment activity is expected to remain stable across EMEA this year with $11 billion worth of deals expected, similar to 2011 levels, the real estate services company said.

London and Paris will remain the primary drivers for investment activity, it added.

"The increasing focus on hotel acquisitions is the latest in a series of Gulf-wide investments in European assets," said Kevin Wallace, General Manager, Hospitality Investment and Development Dutco Group and President and CEO, Jebel Ali International Hotels.

The Middle East reported positive results in the three key occupancy performance measurements in 2011 despite the Arab Spring, according to industry consultants STR Global, although performances in individual countries differed greatly.

Occupancy rose by 3 percent to 62.3 percent, revenue per available room (RevPar) increased by 4.1 percent to $125.66 while average daily rates increased 1.1 percent to $201.66.

Against this backdrop, the annual Arabian Hotel Investment Conference 2012 (AHIC) will take place at Madinat Jumeirah in Dubai on April 28-30.

"Europe's worsening debt crisis will tempt investors from oil-exporting Gulf states, flush with petrodollars, to broaden their search for potential bargains, as Europe's capital markets dry up. Credit conditions are extremely tight, banks are struggling to raise enough cash to cover their own liabilities let alone lending to others," said Richard Thompson, editor, MEED.

"This is naturally leading to an increase of distressed real estate assets in Europe and in the case of hotels, many offer yields that outperform other property investments and are coming to market well below their peak market values, as prices remain subdued," he added.