The Long-Term Play: Hospitality Investment in the Asia Pacific

In a world reined by volatility and a constant stream of uncertainties speaking of purely data-driven decisions is becoming a risk in and of itself. However, there are specific areas where data and forecasts are very much (if not increasingly) relevant. One such field is, perhaps, the global real estate investment market, specifically the hospitality assets in this case. Given that the majority of owners and potential buyers are looking to gain in the long term, the transaction numbers could reflect not only the current sentiment but also the possible future trends for the world that will have, hopefully, recuperated from the current crisis.

When speaking of hospitality investment, a smile graces our otherwise relatively gloomy faces. According to the recent JLL Hotels & Hospitality Group report, the total transaction volumes in the Asia Pacific will likely cross US$7 billion for the full year 2021, a 15% year-on-year increase. Such numbers give ground to the rising hopes of the upward trend continuing well into 2022 thanks to ever-increasing inoculation rates and the general progress in fighting against the pandemic. As such, the industry is forecasted to attract a minimum of US$9 billion in the capital the next year.

The current stat representing the total investment stands at US$6.34 billion. Overall, the region has seen 127 transactions across 12 countries, building up to a handsome number of approximately 21,000 keys. However, the average price per key has dropped year on year, hitting the mark of US$303,000 from $369,000.

“The Asia Pacific hotels industry is well primed for an investment resurgence that will gather momentum in 2022. While COVID-19 will continue to impact the industry and influence capital deployment, investors are increasingly viewing the current environment as an opportunistic time to get deals done,” says Mike Batchelor, CEO, Asia Pacific, JLL Hotels & Hospitality Group.

Three countries are currently dominating the activity in 2021. China, Japan, and Australia have been responsible for 67% of total volume in the Asia Pacific. Scoring the first place, China has transacted US$1.52 billion in sales in the year to date, while Japan, a long-time leader for regional hotel investment, attracted the second-largest amount of capital, despite this year being a relative fiasco compared to 2020, with US$1.48 billion in hotel transactions. Closing the list of leaders, Australia accounting for US$1.26 billion in investments in 2021 thus far.

“In our interactions, buyers are viewing the external backdrop as the start of a new investment cycle for the hotels’ space. However, the region remains characterized by a sizeable bid-ask spread, as owners are bolstered by relatively low gearing and strong lender relationships. As a result, sellers are holding for higher pricing while waiting for market conditions to improve. All and all, we remain extremely confident on the sector’s longer-term appeal,” says Nihat Ercan, Senior Managing Director, Head of Investment Sales, Asia Pacific, JLL Hotels & Hospitality Group.

According to the JLL analysis, cross-border capital may be the clue to the sustained success of the region regarding the hotel investment market not only this year but in 2022 as well. New sources of capital continue to emerge, for example, family offices and private investors from Europe and the Middle East, which are now starting to eye the region in search of more lucrative deals and positive long-term return on investment forecasts.