Investor sentiment for Asia Pacific hotel assets remains robust in 2013. Jones Lang LaSalle provides 2013 outlook on the hotel investment market.
SINGAPORE, 23 January 2013 - Asia Pacific hotel transaction volumes are projected to reach USD 3.5 billion in 2013 on the back of strong investment sentiment to buy hotel assets in the region, Jones Lang LaSalle’s latest Hotel Investment Outlook report has revealed. This projection represents an improvement on 2012 volumes, where hotel sales activity dropped 30 percent on the previous year to US$3.3billion. Australia and Japan are expected to see the lion's share of investment dollars this year, while pockets of activity will be seen across the rest of the region.
More investors will look to acquire or develop Asia Pacific hotel assets in 2013 as they seek to secure a foothold in the region, according to Jones Lang LaSalle's 2012 year-end Hotel Investor Sentiment Survey. Investor appetite for acquisitions is strongest for Phuket, Ho Chi Minh City, Auckland, Osaka and Tokyo while Asia Pacific hotel markets continue to rank among the highest globally for development sentiment, with Bali, New Delhi and Mumbai appearing in the global top ten.
Despite strong investor sentiment, a low level of established product for sale will widen the pricing gap between buyers and sellers and slow the pace of transaction volumes.
In light of this, investors will continue to consider new developments in order to achieve sufficient scale across the region. Hotel supply in Asia is projected to increase by an average of 5.5 percent per annum across 23 major markets over the next two years.
Other forecast highlights include:
- Inter-regional capital will remain active in Asia Pacific's hotel investment market in 2013. The successful listing of two new hotel REITs in 2012 and more planned for 2013 is likely to result in higher volumes by these groups, for whom diversification is key. REITs have been willing to consider assets in secondary locations to ensure overall viability.
- Transaction volumes in Japan are expected to improve with trading performance returning to pre-quake levels. The market offers significant leverage opportunities with interest rates at near zero and lenders more willing to originate non-recourse loans. Hotels in Tokyo will continue to be afforded a premium while markets outside Tokyo - such as Sapporo and Osaka - offer investors attractive high yield opportunities.
- As operating companies digest an oversupply of luxury rooms in major cities in China, the mid-market will be an exciting space to watch over the next five years. The mid-segment is currently under-represented from a brand and investment-grade product perspective, however, a wealthier travelling middle class point to a significant opportunity.
- Australia remains a target for cross border capital with interest from Asian groups in prime hotels still exceptionally strong and selective interest from new capital sources like the Middle East and China.
- Investment benchmarks are being established in India. The dynamics in 2013 will favour both buyers and developers with a slowdown in in development activity and more opportunities to acquire.
- One of the region's hotel investment hot spots, Thailand is expected to remain robust in 2013 with more deals anticipated in Phuket and Bangkok.
The introduction of a new REIT law is also expected to increase liquidity in the hotel and property investment market.
Scott Hetherington, CEO, Jones Lang LaSalle Hotels and Hospitality Asia said: "While we are seeing strong investor appetite, sell intentions in Asia Pacific are the lowest of all the regions. This is attributed to a softening of yield and leveraged initial rate of return expectations. Consequently, we expect transactions of existing assets to be broadly consistent with 2012 next year and pick up in 2014. The exception is South East Asia which is exhibiting strong trading sentiment, healthy RevPAR growth and new investment-grade product."