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Investors Find Comfort in Hotel Market
Real Estate

With continued economic turbulence in the euro zone and lackluster performance elsewhere in Europe, the search for investment havens has alighted on an unlikely asset class: hotels. The European hotel industry may be sensitive to economic fluctuations, but hotel values, which suffered less during the 2008-2009 financial crisis than those of shops or offices, have recovered and investors now appreciate the sector's resilience and cash generation, industry experts say. As the euro has slipped in value against other major currencies amid the economic woes, the euro area has become attractive as a holiday destination for Asians and Americans, boosting occupancy rates and the market for hotel real estate. Hotel property transactions in Europe, the Middle East and Africa reached €8.94 billion ($11.24 billion) in 2011, up 14% from the previous year, according to property-services company Jones Lang LaSalle. That is well below the €21.37 billion in 2007 but up from €3.3 billion in 2009. And 2012 is likely to be even stronger, Jones Lang LaSalle said. Four-star hotels accounted for 45% of the €2.5 billion in transactions in the first quarter of this year, compared with 27% a year earlier.There is some skepticism about how long the trend will continue. Some market-watchers expect distressed sales to cause the market to soften again.

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