Gaining Momentum: Asia Pacific Hotel Investment Successfully Rebounds

Growing an impressive 46% year-on-year to reach US$12.1 billion, Asia Pacific hotel investment came back strong in 2021. According to the latest CBRE research, the industry’s steady rebound was founded on a growing volume of capital looking to increase their exposure to the sector. “Hotels are among the sectors poised to benefit as the region’s borders reopen. The sector offers attractive risk-adjusted yields and asset repositioning opportunities to investors seeking enhanced returns. Hotels have gained appeal as a potential inflation hedge due to the sector’s uniquely short lease period measured in days rather than months or years as with other property types,” said Steve Carroll, CBRE’s Head of Hotels & Hospitality, Capital Markets, Asia Pacific.

Seeking diverse value-add opportunities, investors are increasingly eyeing the hospitality sector. Positively impacted by a continuous reopening of borders and easing travel restrictions, capital owners such as REITs, private offices, and a growing volume of private equity are purchasing properties to upgrade guest offerings in anticipation of the recovered tourist demand, as well as converting some hotel assets into offices and co-living spaces.

This phenomenon is particularly evident in Hong Kong SAR and Singapore where there is ample demand for cost-effective accommodation amid a rather rigid rental market. Mr. Atakawee Choosang, Head of Hotels, CBRE Thailand commented, “For Thailand, hotel owners and developers are re-examining ways to better utilize spaces in light of the new norm post-COVID-19, otherwise exploring potentially selling their assets. For existing hotels, many operators and investors have taken advantage of the pandemic-induced lull in guests to upgrade and refurbish in preparation for the full return of guests, investing CapEx to implement new technology such as smart systems as key points of differentiation.”

In terms of the sub-sector demand, the resort segment seems to be leading the way. CBRE expects to see more capital investment in leisure-focused properties in the second half of 2022 as competition for choice assets heats up in anticipation of a full recovery in occupancy. Meanwhile, the sentiment remains cautious towards urban hotels, which are probably to lag the recovery since companies continue to maintain a cost-sensitive approach towards corporate travel.

“With recovery on the cards for the industry, hotels will soon be welcoming a different type of traveler post-pandemic. There will be a greater emphasis on technology, whether for ensuring hygiene and safety for leisure guests or enhancing conference room and business meeting capabilities for business travelers. Growing environmental and social awareness among consumers is another emerging trend that will drive further ESG adoption in the hotel sector and shape future transactions in this space,” added Mr. Carroll.