LAST year was the strongest year since the global financial crisis in 2007 in terms of hotel investment growth in Asia, according to the latest figures from JLL’s Hotels & Hospitality Group.
Investment volumes in the region reached US$7.5 billion at the end of 2013, up 218 per cent over 2012 and defying all industry expectations.
JLL forecasts 2014 to be a similarly stand-out year, although transactions volumes are likely to fall on the back of limited supply, despite strong demand.
Singapore, Japan and China dominated in terms of transaction volumes. Japan topped overall investment volumes at US$2.7 billion, up 480 per cent over 2012, as hotel trading performance improved in line with the expansion of the domestic economy and renewed growth in corporate and leisure travel.
Capital values reached new records for the Singapore hotel market, resulting in transaction volumes of US$2.0 billion, over 10 times that recorded in 2012. This was predominantly supported by the sale of Grand Park Orchard hotel and Knightsbridge retail, the City’s largest single asset transaction to date.
China accounted for around 13 per cent of total investment activity, recording US$1.1 billion of transactions, as recent government announcements to improve access to financing drove investor sentiment over 2H2013.
Other markets that experienced strong growth in the region as a result of improved connectivity and burgeoning outbound travel from China include Hong Kong (US$486.7 million, up 19 per cent YoY), Thailand (US$337 million, up 31 per cent YoY) and the Maldives (US$267.6 million, up a huge 614 per cent YoY).
Mike Batchelor, managing director investment sales, Hotels & Hospitality, JLL, said: “Strong investor sentiment and, importantly, the availability of quality hotel assets were key reasons behind Asia’s impressive sales volume in 2013, which was hindered only by the availability of additional stock as many owners increasingly hold off selling assets in anticipation of further market growth.
“Mature hotel markets such as Singapore continue to be governed by well-capitalised, inter-generational investors and as stock becomes increasingly limited, investors are now starting to look further afield once again at new and emerging markets in the region.
“There remains no shortage of capital to be invested into the sector in 2014 (mostly from interregional Asian investors). However, improved trading performance and the tightening of cap rates have elevated the expectations of the region’s sellers.
“The resulting restricted supply will shape activity this year and, while overall deal flow will remain robust, we expect volumes to moderate in 2014 because of fewer landmark transactions and portfolio deals in the key gateway locations.”
On markets that will receive the most investor attention throughout 2014, Frank Sorgiovanni, vice president, research and strategic advisory, Hotels & Hospitality, JLL, said: “Japan, Indochina and the Indian Ocean may account for the majority of transaction volumes in 2014.
“Investors are gradually considering emerging hotel markets such as Myanmar and Sri Lanka where deals will be opportunistic. The Singapore and China markets will also remain strong on the back of robust investor appetite.”
