SINGAPORE, 15 July 2022: 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 $6.8 billion.
According to data and analysis from JLL Hotels & Hospitality Group, investments in the first half of 2022 represent a growth of 33.0% year-on-year and an increase of 11.9% compared to 2019, demonstrating a return to pre-pandemic levels of capital deployment in the Asia-Pacific hospitality sector.
In total, there were 75 transactions in the first half of 2022, down 20.2% year-on-year and 33.0% compared to the first half of 2019. However, the total number of rooms traded in the first six months of 2022 was 19,822, which represents 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 Dealing activity has been driven by a surge in portfolio transactions as institutional investors sitting on the dry powder look to deploy their capital more efficiently. 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. from before Covid. As a result, the two-year lull in investment activity has largely eased, as evidenced by record levels of capital raised for deals in gateway markets and resort destinations across Asia- Pacific,” said the senior managing director of JLL Hotels & Hospitality Group, responsible for investment sales. , Asia-Pacific Nihat Ercan
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’ price expectations.
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 USD 0.7 million), the Maldives (205.5 million USD) and Indonesia (159.6 million USD) continued to recover strongly. Activity in Australia (145.5 million USD) and Thailand (37.7 million USD) was more moderate but should be strengthened in the second half due to the conclusion of numerous agreements with brands.
“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. 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,” commented Mike Batchelor, CEO of JLL, Asia-Pacific.
Country highlights, based on JLL analysis and research, include:
- Australia: Trading volumes in Australia were relatively low in the first half of 2022 and down 66.0% from volumes in the first half of 2021. According to JLL, approximately $700 million worth of trades have been traded but not yet settled , which will drive trading 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 containment 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 result in further hotel asset price reductions and predicts that the volume of hotel transactions in China will reach around $2 billion in 2022.
- Japan: The market has seen a remarkable 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 determined to acquire hotel assets in Japan due to an expectation of strong domestic and international tourism demand due to the recent devaluation of the Japanese yen. Against the backdrop of rising global rates, Japan’s debt funding environment remains attractive for investors. As such, JLL expects the country’s trading volumes to remain strong for the rest of the 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 of nearly $900 million topping levels in the past. before the pandemic. Transactions have been most active in the middle market space, where investors have identified opportunities to convert properties into cohousing products to improve performance.
- 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. Many private equity funds and family offices are currently active in the Thai hotel market, and JLL is seeing an increase in foreign interest with the lifting of travel restrictions. JLL predicts that trading volumes will reach nearly $300 million for the year 2022.
- 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 into 2022 and, in turn, the market continued to attract interest from investors from Asia, the Middle East and Europe. Overall, we expect 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.
JLL (NYSE: JLL) is a leading professional services firm specializing in real estate and investment management.