BANGKOK: The recovery of the hotel sector in Asia-Pacific continued to gain momentum in 2022, with investment volumes for the first half of the year totaling US$6.8 billion*, reports JLL, international real estate broker and consulting firm.
According to JLL data and analysis, investments in the first half of 2022 represent 33% year-over-year growth and an 11.9% increase from 2019, demonstrating a return to deployment levels of pre-pandemic capital in the Asia-Pacific hotel sector.
In total, there were 75 deals in the first half of 2022, down 20.2% year-over-year and 33% from first-half 2019 figures, Jll noted in a recent statement.
However, the total number of rooms traded in the first six months of 2022 was 19,822, an increase of 29.9% compared to the first half of 2021 and 9.4% during the pre-pandemic period in 2019.
“The increase in deal activity was driven by an increase in portfolio deals as institutional investors sat on dry powder looking to deploy their capital more efficiently,” the report noted.
However, according to JLL, the current momentum will likely be tested by growing macroeconomic and geopolitical headwinds in the second half of 2022.
“The resilience of Asia-Pacific’s hospitality sector and the reopening of borders have further accelerated in 2022, with pandemic-induced pent-up business and leisure demand ensuring that travel demand will soon be on par with current levels. pre-COVID,” said Nihat Ercan, Senior Managing Director, Head of Investment Sales, Asia-Pacific, JLL Hotels & Hospitality Group.
“As a result, the two-year lull in investment activity has largely eased, as evidenced by record levels of capital raised for deals in Asia’s gateway markets and resort destinations. -Pacific,” he added.
Investment activity has spread across various Asia-Pacific markets as open borders have allowed many markets to shift from reliance on domestic demand to inbound leisure and business. However, the combination of current favorable travel market conditions and the longer-term economic outlook is creating a mismatch between buyers’ and sellers’ pricing expectations, the report notes.
In terms of investment volume, Japan ($1.8 billion), Korea ($1.7 billion) and Greater China including Hong Kong ($1.6 billion) received the most capital in the first half of 2022.
Singapore ($899.7 million), the Maldives ($205.5 million) and Indonesia ($159.6 million) continued to recover strongly. Activity in Australia ($145.5m) and Thailand ($37.7m) was more subdued but will likely strengthen in the second half as a number of brand deals are struck, the report adds. .
“A more sustainable recovery in travel will intensify the biggest challenge facing many investors to successfully deploy capital into investment-grade products in the region,” said Mike Batchelor, CEO, Asia-Pacific, JLL Hotels & Hospitality. Group.
“We remain strongly confident that the total volume of hotel investment in Asia Pacific will cross the $10 billion mark despite asset scarcity coupled with macro and geopolitical headwinds that will continue to influence capital activity,” he said. he added.
Country highlights, based on JLL analysis and research, include:
Thailand: JLL says more hotels are entering the market as sellers come under increasing pressure to sell. While buyers are actively searching, they are opportunistic in their pricing and more conservative when bidding on properties. There are many private equity funds and family offices currently active in the Thai hotel market and JLL is seeing an increase in foreign interest with the lifting of travel restrictions. JLL expects trading volumes to reach nearly $300 million for the full year of 2022.
Australia: Trading volumes in Australia were relatively low in the first half of 2022 and down 66% from volumes in the first half of 2021. According to JLL, there are approximately $700 million worth of deals that have been traded but not yet settled, which will drive transaction volumes over the rest of the year. Investors also remain keen to deploy capital in hotel assets in Australia and New Zealand with a “flight to quality” strategy or in mid-sized properties where active asset management or conversion of use can generate notable returns.
China: Year-over-year hotel transaction volume decreased by 43.8% due to strict lockdown measures in many cities due to a resurgence of COVID cases in China, many hotel transaction activities likely to be delayed to Q4 2022 or Q1 2023. JLL expects the combined impact of China’s “three red lines” and “zero-COVID” policies to drive further asset price reductions and expects China’s hotel transaction volume to total approximately $2 billion in 2022.
Japan: The market saw a notable recovery in the first half of 2022, with major Japanese metros tracked by JLL up 91% for the year 2022 to date compared to the same period last year. Investors remain committed to acquiring hotel assets in Japan due to strong domestic and international tourism demand expected due to the recent devaluation of the Japanese yen. Against the backdrop of global rate hikes, Japan’s debt funding environment remains attractive to investors and as such, JLL expects the country’s trading volumes to remain strong for the remainder of the year. year.
Singapore: As one of the first countries to lift most travel restrictions in Asia, Singapore has rebounded the fastest with year-to-date transaction volumes nearing $900 million topping pre-levels. the pandemic. Transactions have been most active in the mid-market space where investors have identified opportunities to convert properties into co-housing products to improve performance.
Maldives: The market demonstrated its resilience in 2021 as a global gateway resort destination, with hotels generally performing better than in 2019, despite the noticeable lack of Asian demand for much of the year. This momentum continued in 2022 and, in turn, the market continued to attract interest from investors from Asia, the Middle East and Europe. Overall, JLL expects higher investment volumes this year from marquee sales such as W Maldives and Sheraton Full Moon Resort, with more sales currently underway for the second half of the year.
* All dollar amounts shown in this report are in US dollars.