The Americas region will face another challenging year for hotel transactions in 2010 as the market remains hampered by limited debt liquidity, says JLL. Nonetheless, deal volumes are expected to rise to at least $3.5 billion, according to JLL Hotels' Hotel Investment Outlook report, which premiered at the Americas Lodging Investment Summit in San Diego. The increase in transaction volume will be driven by the bottoming-out of RevPAR, the significant amount of equity entering the market and increased pressure on some owners and lenders to sell or recapitalize assets. These factors will result in the narrowing of the bid-ask spread and an increase in seller financed deals.

"This increase will mark the first rise in two years, but is still approximately 40% below the annual volumes recorded from 2000 to 2003," says Arthur Adler, managing director and CEO-Americas for Jones Lang LaSalle Hotels. "To the extent that several portfolio transactions are completed, transaction volume will exceed the $3.5 billion level."

During 2010, considerable differences in the operating and investment environments of hotel markets across the Americas region will emerge as the market continues to reset itself. In the US, investors will jump back in the market once hotel fundamentals are near the bottom and will be attracted by the significant discount to both replacement cost and to peak values, the report states. In addition, investors recognize that the recovery will be robust due to the operating costs that have been taken out of the business, much of which is sustainable, and the fact that the liquidity crunch will choke-off new supply for the foreseeable future.

"In 2010, there will be more pressure on banks—having already extended loans for six to 12 months—and there will likely be an increase in foreclosure and deed-in-lieu activity, but a tidal wave of distressed buying opportunities is not expected," Adler says.