Property Sector

Hotel Investment to drop in Asia Pacific

Asia Pacific is expected to be home to US$8.5 billion (S$11.9 billion) in hotel investment this year, a slight 5 to 10 percent decline on last year, according to a report by JLL Hotels & Hospitality Group.

Japan, which saw its highest level of hotel transactions to date last year, will remain the standout market in the region, while growth in Mainland China should continue, it said.

"In 2015, the headlines featured blockbuster acquisitions of high-profile, gateway market hotels by investors from Mainland China, Hong Kong and the Middle East," said Mr Scott Hetherington, chief executive officer of JLL Hotels & Hospitality, Asia.

"This year, we expect transaction activity across the region will slow somewhat, with a likely shift to secondary markets in Southeast Asia and the Indian Ocean."

More than 33,000 hotel rooms changed hands in the region last year, at a total value of US$9.2 billion.

Japan, followed by Australia and Hong Kong led the pack. Some of the big-ticket transactions included the sale of the InterContinental Hong Kong for US$938 million and the Westin Sydney for AUD445 million.

An increasing amount of money has been coming from investment and private equity funds, JLL noted.

Among the trends to look out for this year is the continued consolidation of hotel brands, it added.

Last year saw Marriott purchase Starwood and Accor acquire the Fairmont hotels group.

"Hotel brands are on a never-ending quest to bolster their pipeline and with the natural attrition in properties and limits to new supply growth, the surest way is often by acquiring operators with strategic management or franchise contracts," said Mr Mark Wynne Smith, global chief executive officer of JLL Hotels & Hospitality Group.

In Japan, deals should continue to come with demand from domestic real estate investment trusts, private equity funds from the United States, Southeast Asian families, and Chinese investors.

Mainland China has also started to see hotel trades worth about US$1 billion annually, which should continue or even rise this year, JLL said.

Australia will remain active as well, although given the large number of prime assets sold to long-term holders recently, fewer hotels will be available on the market.

In Singapore, tightly-held stock means deals will be few and far between, while in Hong Kong, investors are likely to take a wait-and-see approach as hotel performance there has largely peaked.

There could also be increasing interest in secondary markets, with investment opportunities coming up in countries including Thailand, the Maldives and Mauritius, JLL said.