JLL: Headwinds slow hotel investment

SINGAPORE, 31 October 2023: Hotel investments in Asia Pacific will cool to USD10.1 billion for 2023 due to external factors, representing a year-on-year decline of 14%. 

According to JLL’s Hotels & Hospitality Group’s recently published Hotel Investment Highlights Asia Pacific, a decline in both transactions and investment volumes versus 2022 is mainly attributable to the combined headwinds of interest rate increases, cost inflation, and macroeconomic uncertainty. 

JLL data and analysis suggest that most major metrics are down in 2023 year-on-year. As of October 2023, investment volumes tracked by JLL stood at USD5.9 billion, significantly down on the same period of 2022 of USD9.8 billion. The average price per key or room was also less during 2023 to date at USD291,600 versus USD368,900 in 2022. According to JLL, 130 hotel transactions have been recorded across 13 markets in Asia Pacific, down from 168 deals during the same period in 2022. Furthermore, the number of hotel keys transacted in 2023 year-to-date stands at 24,800 versus 27,990 during the comparable time in 2022.

“The post-pandemic recovery of the Asia Pacific hotel industry has been extremely encouraging in 2023, but the strong performance of the sector is not translating into comparable investment volumes. Investors have more frequently cited higher borrowing costs, lingering inflation and the uncertainty of the global economy as influencing factors during the past 18 months. We’re now witnessing concerns translate into a more subdued investment market. However, we believe investor confidence remains very high in the longer-term due to strong operating performance and traveller demand,” says JLL’s Hotels & Hospitality Group, Asia Pacific CEO Nihat Ercan.

The business performance of the market stands as a further testament to the longer-term confidence of investors in the hotel sector. As of YTD September 2023, revenue per available room (RevPAR) recovery is at 95% of pre-pandemic levels, with many markets far ahead of this number and setting new RevPAR benchmarks, and with average daily rates (ADR) reaching new highs.

Japan’s hotel market has performed strongly year-to-date, with RevPAR already ahead of pre-pandemic levels and transaction volumes crossing USD2.2 billion. JLL forecasts USD2.9 billion in transactions in Japan for the full year.

Investment activity has been more muted in Australia and New Zealand despite strong ADR growth and steady occupancy recovery in major cities. Year-to-date, JLL estimates investment volumes of USD960 million and forecasts 2023 activity to close at over USD1.7 billion.

Hong Kong’s reopening represents more of a stable recovery in the hotel sector, with visitor arrivals now exceeding 2019 and RevPAR in the luxury segment on par with pre-pandemic levels. JLL believes that transactions in Hong Kong will finish 2023 at USD900 million as lingering concerns about rates offset the return of travellers to the territory.

Singapore hotel’s solid operating performance, with RevPAR up 13% versus 2019, has been one of Asia Pacific’s least-traded major markets. Despite the closing of PARKROYAL on Kitchener Road, which represented the largest single-asset transaction in Singapore, transaction volumes are expected to decline by 45% in 2023 to $500 million as assets remain tightly held.

The Maldives was one of the first markets to recover following the pandemic, and tourism is up a further 14% so far this year. After a strong year of transactions in 2022, the investment volumes are now projected at USD95 million for 2023, down 54%, yet with several transactions in the pipeline.

“Looking to the balance of 2023 and 2024 ahead, there are more tailwinds than headwinds, including a levelling of interest rates, high amounts of impending debt maturity and substantial dry powder capital, which will influence investment decisions. We’re confident of the ongoing recovery in the sector and see investment volumes crossing USD10.4 billion in 2024,” says Ercan.


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