Commercial News » Singapore Edition | By Michael Gerrity | November 1, 2022 8:31 AM ET
According to JLL's Asia Pacific Hotel Investment Highlights Report for 2H 2022, investment volumes are projected to increase by 14% year-on-year as normalcy returned to the market with the resumption of broad leisure and business travel in the region.
In the first nine months of 2022, hotel transactions in Asia Pacific totaled $8.4 billion, a 16% increase year-on-year. Volumes were strongest in Japan, which reclaimed its position as the region's most active travel market, logging $2.3 billion in transactions for the first nine months of the year. Significantly, South Korea reached a new historic peak, with year-to-date transactions of $1.8 billion setting a new benchmark. Investment activity also remained strong in China at $1.2 billion and Australia at $696 million.
Over the nine-month period, the average price per key rose to $445,000 from $331,000 a year earlier. A total of 123 hotel deals were transacted in 2022 year-to-date versus 139 year-on-year in 2021, indicating that larger assets and hospitality platforms are being transacted more this year.
"Hotel investment transitioned from recovery to growth in 2022, led by the surge of tourism and corporate business demand, prompting investors to deploy capital in a big way. Although external headwinds are brewing and the availability of investment-grade assets will remain a challenge, we remain extremely optimistic that the current growth trajectory will stay the course albeit with a more conservative approach to pricing and a fluid economic situation," says Nihat Ercan, Senior Managing Director, Head of Investment Sales, Asia Pacific, JLL Hotels & Hospitality Group.
JLL analysis shows that there is some pressure on the industry as institutional capital is outstripping the supply of hotels available for acquisition in Asia Pacific's markets. According to 120 respondents polled by JLL, 73% of investors are interested in deploying capital in the hotel sector in the next 12 months. As a result, investors are also becoming more creative with the use of their real estate to maximise their income potential. Despite the pandemic, the alternative accommodation sector has proven to be resilient, and the blurring of real estate sectors is accelerating the growth of alternative accommodations across all regions.
Increasingly, with rising interest rates, access to debt will influence purchasing decisions. JLL's recent poll of investors reported 74% indicating that their access to debt had remained similar to 2021 levels or deteriorated further, and 63% indicated that borrowing costs had increased. The rising cost debt will likely benefit cash-rich buyers, believes JLL, with high net worth individuals (HNWIs) and family offices playing a more active role in the hotels market for the rest of the year and into 2023.
According to JLL analysis, the Asia Pacific hotels market will continue to draw more investment in 2023 but the combination of macroeconomic headwinds and other external factors will ensure a slower growth trajectory. For the full year, investment volumes will likely grow by around 6%, says JLL, to finish 2023 at $11.5 billion.
"The outlook for the region's hospitality is robust yet realistic, a fact that will be reinforced by more measured transactional growth in 2023. The hotel industry should be better positioned to adapt to inflationary pressures and while the sector will remain a sound investment, we do expect activity to grow at a slower pace," says Mike Batchelor, CEO, JLL Hotels & Hospitality Group, Asia Pacific.