Hope Prevails: USD8.5 billion of investment in 2021 in the Asia Pacific Hotel Industry

Having experienced one of the worst crashes in modern history, the Asia Pacific hotel market seems to be getting back on track in terms of the rapidly increasing investment volume. According to the JLL Hotel & Hospitality Group's annual hotel investment outlook, the region attracted a total of USD8.5 billion, accounting for 13% of the world’s global market share in the industry. This represents a 39% increase in the level of activity compared with the respective period in 2020. Nevertheless, sales are yet to start impressing us all over again barely reaching 40% of the volumes recorded in the pre-pandemic era.

While capital investment was complicated by the ongoing pandemic restrictions and border controls in almost all key economies, it managed to impress a critic’s eye and, perhaps, not disappoint an optimist either. Characterized by a wide bid-ask spread, it still proved to be attractive enough for the new entrants, seduced by the idea of capitalizing on burgeoning assets. Some of the essential factors for such success are the presence in urban areas of five high-end properties transacting at over USD10 million per key, as well as robust single-asset transaction activity responsible for a whopping 85% of the total volume in the Asia Pacific.

According to Nihat Ercan, Senior Managing Director, Head of Investment Sales, Asia Pacific, JLL Hotels & Hospitality Group, transaction activity last year was stable and “demonstrated that investors are looking longer-term when considering their exposure to Asia Pacific hospitality assets.” He also added that “as international travel becomes more accessible, and both leisure and business travel markets further recover, investors will tap into sizable dry powder resources and deploy strategically into the hotel sector across a diverse array of markets.”

A case in point is the Maldives. Benefitting from the demand renaissance and seeing its international arrivals grow by 125% year-on-year, Maldives upper-upscale and luxury RevPAR did not disappoint, standing 24% above the 2019 levels. Such smile-inducing numbers are possible largely thanks to the strong interest from international markets such as Western Europe, Russia, and the Middle East. The three resort transactions involved cross-border investors from Italy, Singapore, and the Middle East, resulting in an average price per room of US$860,000.

Speaking of the global picture, the total hospitality transaction volume reached $66.8 billion in 2021, a 131% increase from 2020. As the recovery among asset classes proved to be rather heterogeneous, investors were mostly interested in luxury and resort properties. Assets situated in urban locations remained the most liquid, but the level of activity in 2021 was down 22% from 2019 levels. 2021 also saw its buyer pool diversify and private equity groups increasing their representation in the world of hospitality asset investment by $25.4 billion over 2020 levels, representing 50% of all transaction activity globally.

While the past year has brought us good news in terms of the recovery of capital markets and the industry's ability to attract cross-border investors, it is very hard to say how things are likely to look like this year, given global shocks following Russia’s invasion of Ukraine. The time will show what happens to the interconnected world when such important players are restricted from entering the stage.