Hotel investment across Europe, Middle East and Africa (EMEA) fell to €2.9bn in 2009, a drop of -63% compared to 2008, reflecting the lowest volume of transactions since the late 1990’s according to a report by Jones Lang LaSalle.

JLL predicts that investment volumes will pick up by the end of 2010 with a potential increase of +40% on 2009’s volume. Driven by improved economic conditions, increased investor confidence and more stock on the market investment volumes may reach €4.1bn in 2010.

Mark Wynne-Smith, CEO of Jones Lang LaSalle Hotels, EMEA, said: “The EMEA hotel market will continue to be difficult in 2010, albeit with some important signs of improvement. Transaction activity will be characterised by two types of investors, opportunistic buyers and secure income buyers. The former will be most apparent in the markets most severely impacted during 2009, including the UK, Spain and Ireland. The latter group will mainly constitute institutional investors, searching for properties with a solid income and sound covenants.”

Continental Europe recorded the highest level of activity of hotel investment with the strongest demand apparent for key gateway cities, such as Paris, taking the lead. Germany and Spain were third and fourth places respectively, as investment activity in the UK came to a virtual standstill pushing it into second place. However, during 2010, the UK is expected re-take top spot with regards to volume, moving back towards a 30-40% share of investment into EMEA.

During 2010 the number of distressed hotel assets on the market is expected to slightly increase, despite many owners have faced refinancing challenges in 2009, distressed hotel sales have not been widespread. Many UK financial institutions decided to work with owners to avoid selling in the current market.

It is expected that throughout 2010 investment activity will be driven by the banks and their willingness to lend, with a focus on smaller deals and risk adversity.