SINGAPORE, 17 June 2022: Investors in Asia Pacific hotels will increasingly make investments based on sustainability as expectations from shareholders and ambitious net carbon zero targets assigned by governments influence decision-making.
Approximately 75% of investors surveyed by JLL identified environmental, social and governance (ESG) factors as necessary when deploying capital, despite Asia Pacific’s hotel sector lagging behind other regions in the adoption of sustainability practices.
According to JLL analysis, investors and operators will prioritize ESG aspects of hotel investment to help secure funding for asset purchases or redevelopment. Given that most global investors are headquartered in Europe and the United States, where they face strict requirements from institutions and governments, Asia Pacific’s hotel sector is not immune from scrutiny. It will require more defined ESG strategies to meet both investor and consumer demands.
“The hotel industry in the Asia Pacific does lag other regions when benchmarked on sustainability factors and practices. Mounting pressure from shareholders and governments is compounded by the fact that many investors have limited access to sustainability-linked loan facilities in the Asia Pacific. However, we do see opportunities for new developments built by local high net worth individuals and local corporates and developers to tap global investors for green funding options,” says JLL Hotels & Hospitality Group senior managing director, head of investment sales, Asia Pacific Nihat Ercan.
Globally, the hotel sector accounts for 1% of global carbon emissions, according to the United Nations World Tourism Organization (UNWTO). The industry is also the biggest consumer of energy and water among all real estate asset classes. However, emissions vary by geography, with the Asia Pacific seen to be lagging behind North America and Europe, producing more emissions per occupied room – due primarily to climate and air conditioning usage – than other regions.
The challenge in the Asia Pacific and other regions of the world will be based on financing for new development and retrofitting existing hotels to make them net-zero. However, JLL analysis suggests that any meaningful movement towards a longer-term ESG-based transition will require a partnership between investors and operators to meet end-user expectations.
Furthermore, the pandemic has changed consumer expectations and elevated awareness of ESG principles within the international hotel sector. More than 80% of global travellers plan to stay at a sustainable hotel at least once in the next year, according to Bookings.com
“To meet changing consumer demands, hotel owners and operators in Asia Pacific will be forced to adapt business strategies to include clear ESG factors and goals. Hotel operators are an important sale vector to drive technical standards, especially as they are on the forefront and in direct contact with clients and accounts who are increasingly sensitive to sustainability,” says JLL Hotels & Hospitality Group managing director and head of the hotel advisory and asset management the Asia Pacific, Xander Nijnens.
While hotel investors in the Asia Pacific are behind other parts of the world regarding sustainability, hotel operators are leading the change in the sustainability journey regionally, having implemented several measures to monitor energy and water consumption. Approximately 50% of polled hotel operators identified operational aspects of hotel management and maintenance as their key sustainability priority.
JLL surveyed approximately 168 clients (investors and operators) across the Asia Pacific in April for this report. Learn more here.
JLL (NYSE: JLL) is a leading professional services firm specialising in real estate and investment management.