TRANSACTION volumes for hotel investments in the Asia-Pacific region are likely to reach US$3.5 billion this year, with Australia and Japan to get a large slice of the investment pie.
According to the Jones Lang LaSalle (JLL) Hotels’ Hotel Investment Outlook 2013 report released early this week, the figure is slightly higher than 2012’s, but under the short-run average of US$4.1 billion.
This follows a slowdown in hotel trade activity in 2012, when volumes fell 30 per cent to US$3.3 billion. “Australia dominated deal flow, whereas bank inaction in Japan and a noticeable absence of sales in Asia’s key gateways were the major contributors to lower than anticipated transaction volumes against a backdrop of investor conservatism,” stated the JLL report.
Nevertheless, Asia continues to be a hotel development hot spot in the world, with long-term fundamentals – a rising middle class, improved connectivity, urbanisation, rising education levels, high savings and lower taxes – remaining in place.
Supply within the region is projected to increase by 5.5 per cent a year, across 23 major markets in the next two years, though “commencements have slowed in India, South-east Asia and China as cities suffer indigestion following significant new hotel openings in recent years”, said the report.
Meanwhile, low levels of new supply in Japan and Australia, the region’s two most liquid hotel investment markets, will continue to be an attractive driver for global capital investment.
In Australia, transaction volumes are projected to reach A$1.0 billion (US$1.1 billion) for 2013, a slight moderation of 2012’s figures. The country is a target for cross-border capital, attracting Asian groups interested in prime hotels, as well as selective interest from the Middle East and China.
In Japan, trade returned to pre-quake level by summer 2012 on the back of strong domestic corporate and leisure demand, which helped to balance out the shortfall in inbound tourism. Investments for 2013 are likely to occur outside Tokyo, as they present high yield opportunities and are more attractive than other Asian secondary markets due to the prevailing depth of liquidity.