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Investors seek more Asia hotel assets
Investors are confident in the long-term future of the Asia-Pacific hotel market despite the continuing pressure of the pandemic on tourism and hospitality, says the property services company JLL.
According to a survey of around 100 investor clients in January this year, about 70% say they are bullish on the Asia-Pacific hotel market and are interested in deploying capital into the sector in 2021.
JLL is forecasting approximately US$7 billion in transactions in 2021, an increase of 20% from $5.8 billion in 2020. While sizeable pools of capital are ready to be deployed, pricing and financing will become a larger consideration for investors.
The company believes the gap between buyer and seller price expectations will narrow as distress becomes less likely, while sellers come to terms with the impact of operating cash flow on pricing. Over 80% of investors surveyed are eyeing discounts of 20% to 30%, while sellers are expected to move asking prices by around 10%.
As optimism about a recovery builds, Japan (52%) and Southeast Asia (46%) are emerging as the most desirable hotel investment markets in Asia Pacific, owing to strong demand dynamics and positive long-term fundamentals. Investors also view Australia (31%) and China (22%) favourably.
“The cycle has been reset and we are now on the cusp of a period of recovery,” said Nihat Ercan, senior managing director and head of investment sales in Asia Pacific with JLL Hotels & Hospitality Group.
“Optimism around the deployment of vaccines and an eventual recovery in tourism has started to drive activity and investors don’t want to miss the opportunity. At the same time record amounts of capital have been raised to be deployed into the real estate sector in general, including into hospitality.”
Around 25% of surveyed investors are taking a more cautious approach to deploying capital, seeking greater clarity on the industry’s Covid-19 recovery before committing further funds to the sector. Around 5% of investors polled by JLL are looking to exit the sector and refocus on other asset classes.
“Demand for assets has initially concentrated on core markets like primary cities in Japan and Australia, yet we see this diversifying in the coming months,” said Mr Ercan.
Conversely, investors also see the current environment as an opportunity to invest in existing properties and focus on asset management initiatives including renovations, repurposing and repositioning properties in response to changing consumer preferences.
“The past year has been all about protecting cash flow and this will continue for the coming 12 to 18 months,” said Xander Nijnens, managing director and head of advisory and asset management in Asia Pacific.
“Seasoned owners realise that now is the time to invest in existing hotels, with little displaced business. However, it is a balancing act in keeping operating costs flexible, while investing ahead of the recovery to edge in front of competitors and meet guest needs.”
According to the survey, 36% identify investing in their assets as their primary priority in 2021, coupled with a focus on cost containment and maintaining cash flow discipline.
“There are deals to be done in the current environment, yet value-add players will have the upper hand as they are willing to roll up their sleeves to invest and reposition hotels with a view to selling them in three to five years,” added Mr Nijnens.
Source: https://www.bangkokpost.com/business/2084371/investors-seek-more-asia-hotel-assets