Investment activity in hotels in the Asia Pacific region have recorded a 22 per cent dip at $5.3 billion for the first nine months of this year (compared to corresponding period last year) due to the lack of assets on sale and a pricing gap between buyers and sellers.
According to real estate consultancy JLL’s survey, Hong Kong has led the region with 11 hotel deals worth around $1.5 billion followed by Japan at $1.2 billion and Thailand at $335 million in hotel transactions.
Mike Batchelor, Head of Investment Sales Asia at JLL Hotels & Hospitality Group, said that the sales activity reached $1.2 billion across the region in Q3 with around $1.5 to $2 billion in deals expected to close by this year end.
“We expect total year-end hotel investment volumes to reach between $7.5 and $8.0 billion across Asia Pacific, slightly down from $8.6 billion recorded last year,” he explained.
Hong Kong and Japan
Of the Hong Kong deals, several transactions have potential for conversion into residential or office space. Recently, hotel owners have been considering converting their assets given the strong demand for office space.
“For investors, Hong Kong hotels are appealing because of the discounted rate per square foot when compared to other asset classes, something that has been a factor in some recent transactions. Hotels such as J Plus Hotel has already been purchased for conversion, likely into an office,” said Batchelor.
Japan has remained a stellar performer in terms of hotel investment since 2013. The lead up to the 2020 Tokyo Olympics will continue to boost tourism, with the government aiming to double the number of foreign visitors to 40 million by 2020.
He said the most active buyers in Japan are domestic investors. However, international investors have been increasingly active as Japan’s market fundamentals continue improving and it remains one of the most attractive debt markets in the region.
A large volume of the hotel investment activities in Q4 are also expected to come via Japan, he added.
The hotel transaction volume in Thailand has hit the highest record since 2014. It is expected to reach $420 million this year after it posted $335 million from less than 10 deals in the first nine months.
The interest in Thailand is buoyed up by the stable political environment and relative affordability of hotels compared to other Asian countries, cited Batchelor. Hotels being transacted were in the country’s both first and second tier markets such as Bangkok, Hua Hin and Chiang Rai.
The large transactions included Bangkok Dusit Medical Services’ acquisition of Swissotel Nai Lert Park together with the Promenade Nai Lert Tower for over 10 billion baht and a 342-key unfinished hotel that was acquired by Singapore’s Carlton Hotel for 2.4 billion baht.
Another significant deal was Apollo Global Management’s acquisition of the Bangkok Edition Hotel which is part of the Mahanakorn tower. Hotel 81, the largest owner of hotels in Singapore, also marked its first venture into the Thai market by acquiring Premier Inn portfolio for a combined $111.5 million.
In 2018, Batchelor forecasts Thailand’s transaction volume will be in line or slightly below this year due to several large assets having traded this year. However, interest from both domestic and regional investors is expected to remain strong, buoyed by healthy trading performance and returns.
“Thailand is likely to continue to be one of the region’s favorite investment destinations in 2018. In addition to healthy trading performance and returns, Bangkok is the most visited city in the world in 2017 with an expected arrivals of nearly 20.2 million, surpassing London and Paris, according to MasterCard Index,” he added.