Hotel report: Investors must look to future.

To be successful in 2002, hotel investors must balance a defensive stance in the current economic downturn with a forward-looking approach to recovery, according to Jones Lang LaSalle Hotels' Hotel Investment Strategy Annual. Co-authored with LaSalle Investment Management, the Hotel Investment Strategy Annual is a visionary report that provides macro themes on global hotel real estate investing for the year ahead.

Researchers believe that the wide world of hotel real estate investing will grow wider in the future as new markets begin to open up in China, Central and Eastern Europe, and Latin America. However, given the 2002 global economic slowdown, many investors will need to focus on their domestic markets and adapt a more defensive approach.

According to Melinda McKay, senior vice president of Jones Lang LaSalle Hotels, it is paramount that hotel investors consider certain changes in 2002. "Investors must balance the rapidly decelerating world economy, a once-in-30-years' opportunity to borrow at low rates relative to hotel yields and the rapid rise and fall of risk tolerance in the asset markets when developing their hotel real estate investment strategies for the coming year."

Drawing on a global network of research professionals, the Hotel Investment Strategy Annual provides a region-by-region analysis of real estate markets. Key findings include:

* U.S. hotel markets are much better positioned than in past recessions, and high-income yields and relative stability will attract continued investor interest. With regard to investment opportunities, all major markets will post a recovery in 2002, therefore, investors who have focused on underlying asset values and not on existing cashflow anomalies will benefit.

Counter-cyclical investors who acquire properties in the current trough have the potential to enjoy significant capital gain by disposing of properties in the market recovery phase. Those cities expected to enjoy the most significant turn-around include Boston, Chicago, Los Angeles, Orlando and Atlanta.

* Today, a reasonable prospect exists that Europe's economy will outperform the United States in both 2001 and 2002. Thus in turn, Europe's hotel markets stand to show stronger growth levels in 2002 than their U.S. counterparts; however, the European hotel market will produce a mixed performance in 2002. Prudent investors will have to pick their market exposure more carefully than ever. Transaction activity in 2002 is apt to be similar to 2001, possibly showing a slight increase in single-asset transactions.

* In the Asia Pacific, the economic-recovery that occurred post the 1997-998 crisis faltered during 2001 as most sian economies felt the effects of the global economic slowdown. However, the standout economies of Australia, China and India have remained relatively unaffected and continue to post economic growth. In this region, opportunities for investors should emerge; however, markets vary greatly in terms of availability of debt, treatment of non-performing loans and vendors' price expectations.