Jones Lang LaSalle ups 2010 hotel deal outlook

NEW YORK (Reuters) - Jones Lang LaSalle Hotels boosted its forecast for U.S. hotel transactions this year to up to $4.5 billion, as a jump in room rates and occupancy spurs investor appetite for lodging companies.

The hotel investment services firm earlier forecast $3.5 billion in transaction activity in the United States in 2010.

Jones Lang LaSalle is now forecasting a new range between $4 billion and $4.5 billion. This excludes the roughly $4 billion sale of Extended Stay America, which is expected to be completed this year.

"Improving lodging fundamentals, along with investors' more congruous understanding of values and slowly increasing market liquidity, is driving the boost in investment volume," Arthur Adler, CEO-Americas for Jones Lang LaSalle, said in a statement provided to Reuters on Tuesday.

Last year, hotel deal volume hit a ten-year low of about $2 billion as companies curtailed their travel and as financing for hotel purchases dried up.

But in the second quarter of 2010, there was a strong uptick in hotel investments, Jones Lang LaSalle said.

In the first quarter of this year, hotel deals amounted to $814 million, while in the second quarter, transaction volume totaled $1.4 billion.

In June, Pebblebrook Hotel Trust (PEB.N), run by industry veteran Jon Bortz, bought its first hotel, Doubletree Bethesda Hotel and Executive Meeting Center, for $67.1 million.

Pebblebrook also bought the InterContinental Buckhead Atlanta for $105 million in July.

"Strengthening fundamentals across gateway cities and the U.S. as a whole and the high number of equity-rich acquisitive groups such as REITs, private equity funds and off-shore investors are the underlying forces for our increased 2010 transaction volume forecast," Adler said.

REITS, ASIAN CAPITAL IN FOCUS

The firm's revamped forecast comes just as major lodging companies are set to report second-quarter earnings. Marriott International (MAR.N) reports this week, while Starwood Hotels & Resorts (HOT.N) will post its quarterly scorecard next week.

Hotel operators have said travel demand is on the rebound as the economy begins to recover from a long, deep slump. Potential hotel investors have been able to better access capital, while sellers have been able to lift prices.

For the first six months of 2010, hotel investments and sales eclipsed $2.2 billion, according to Jones Lang LaSalle.

Real estate investment trusts (REITs) accounted for half the overall hotel purchases, while the sale of hotel portfolios accounted for 34 percent of deal volume.

"(Ten) percent of acquisitions volume stemmed from Asian-based capital sources, evidencing that foreign investors are aggressively pursuing favorably priced high-quality hotel assets in the United States," Jones Lang LaSalle wrote.

Jones Lang LaSalle tracks asset transactions of $10 million and above and does not include note sales, foreclosures and recapitalizations.

(Reporting by Deepa Seetharaman; Editing by Gary Hill)