Asia-Pacific hotel investments may ease to $11.8b in 2016

Asia-Pacific hotel investments may ease to $11.8b in 2016

Singapore - The Asia-Pacific is expected to see US$8.5 billion (S$11.8 billion) in hotel investments this year, while markets such as Singapore and Hong Kong will be less active owing to the shortage of available assets.

The figure marks a decrease from the US$9.2 billion in transactions racked up last year in the region, as over 33,000 hotels rooms changed hands, according to a report by JLL Hotels & Hospitality Group.

Markets which saw high-activity last year included Japan, Australia and Hong Kong, with notable sales such as the InterContinental Hong Kong for US$938 million and the Westin Sydney for A$445 million (S$440 million).

Investors came from markets such as China, Hong Kong and the Middle East, as cross border investment accounted for half of all capital flows on deals above US$5 million. In particular, Chinese investors boosted their stakes in Australia and Japan.

There was also greater participation from investment and private equity funds, JLL highlighted.

Scott Hetherington, chief executive of JLL Hotels & Hospitality (Asia), said: "This year, we expect transaction activity across the region will slow somewhat, with a likely shift to secondary markets in South-east Asia and the Indian Ocean."

However, deals in Singapore are expected to be "few and far between", thanks to "tightly-held hotel stock", the report said.

Similarly, investors are expected to take a wait-and-see approach in Hong Kong - which saw its best year yet in 2015 - where hotel performance has already peaked.

Japan, which reported the highest deal volumes in the region last year, will continue to attract attention, especially from domestic REITs, US private equity firms, Chinese investors and South-east Asian family-owned businesses. Likewise, interest will likely remain robust for prime offerings in Australia, especially from foreign buyers. Sydney and Melbourne were singled out in particular as competitive markets, given that available stock is expected to be limited going forward.

Meanwhile, investment opportunities could be thrown up from Thailand, the Maldives and Mauritius.

Another recurring theme this year will be consolidation, following major acquisitions taking place in the industry such as Marriott's purchase of Starwood and AccorHotels buying FRHI Holdings, the parent company of the Fairmont, Raffles, and Swissotel brands.

"Public markets are rewarding growth, creating a strong case for hotel brand consolidation," added Mark Wynne Smith, global CEO of JLL's Hotels & Hospitality 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."

This article was first published on February 11, 2016.
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