Asia Pacific Hotels Industry Attracts US$8.5 billion of Investment in 2021
SINGAPORE, 14 February, 2022 – Asia Pacific’s hotel market recorded a sharp investment rebound in 2021, but levels still remain below pre-pandemic levels as the industry recovery continues. According to JLL (NYSE: JLL) Hotels & Hospitality Group’s annual Hotel Investment Outlook, transaction volume in Asia Pacific totalled US$8.5 billion, accounting for 13% of total global hotel volume. This level of activity represented an increase of 39% over 2020 volumes, however sales remained 40% below pre-COVID levels achieved in 2019.
Capital deployment in 2021 was impacted by ongoing pandemic restrictions and border controls in several key economies coupled with a wide bid-ask spread on properties. Encouragingly, new market entrants were eager to capitalize on burgeoning opportunities, with activity in the region supported by factors including five higher-end hotels situated in urban markets with strong domestic or leisure demand transacting at over US$1.0 million per key and stable single-asset transaction activity, which accounted for 85% of total volume in the region.
“Transaction activity in 2021 was robust and demonstrates that investors are looking longer-term when considering their exposure to Asia Pacific hospitality assets. We’re confident that as international travel becomes more accessible, and both leisure and business travel markets further recover, that investors will tap into sizable dry powder resources and deploy strategically into the hotel sector across a diverse array of markets,” says Nihat Ercan, Senior Managing Director, Head of Investment Sales, Asia Pacific, JLL Hotels & Hospitality Group.
Geographically, the Maldives saw a resurgence in visitation in 2021, with international arrivals in growing by 152% year-on-year. Specifically, Maldives upper upscale and luxury hotel revenue per available room (RevPAR) performance ended 2021 24% above 2019 levels. The rebound in visitation was supported by the market’s ability to successfully attract strong demand from Western Europe, Russia, and several Middle Eastern countries, as it shifted focus from former top source markets in Mainland China, resulting in an average price per room of US$860,000. All three resort transactions during the year were sold to cross-border investors with capital sourced from Italy, Singapore, and the Middle East, underscoring strong foreign investment interest in the market.
Global transaction volume totaled $66.8 billion in 2021, a 131% increase from 2020. With demand’s uneven recovery across asset classes, investors focused on acquiring luxury or resort assets. Assets situated in urban locations remained the most liquid, but the level of activity in 2021 was down 22% from 2019 levels. However, sales activity across assets in resort locations represented a 17% increase compared to 2019 levels. Buyer pools diversified in 2021 with private equity groups increasing their investments in hospitality by $25.4 billion over 2020 levels, representing 50% of all transaction activity globally.
JLL believes that several major themes will influence transaction activity in the Asia Pacific hotels sector in 2022.
• Investors will focus their money on markets that have augmented their profile since the pandemic. According to the report, tourist destinations that have strengthened their competitive advantage and amplified their profile in the marketplace are expected to garner significant interest from investors, especially markets like the Maldives.
• Institutionalized markets with strong domestic demand fundamentals will remain a key focus for cross border investors with Japan and Australia in particular as high priority target markets.
• Hoteliers will continue to face post-Covid headwinds threatening operating margins and potentially hindering RevPAR growth. In 2022, the primary challenges hoteliers will need to monitor closely include labor shortages, supply chain issues and inflationary pressures, all of which pose a threat to attaining material profit growth in the year ahead.
• The industry’s commitment to sustainability can lead to higher asset values, decreased operational costs and increased consumer demand. Consumers, operators and investors will all play a vital role in helping the industry reduce its carbon footprint and all three groups have voiced support for an industry focus on sustainability and the rise of impact investing.
• The blurring of real estate sectors is accelerating growth of alternative accommodations across all regions. The co-living sector is observing notable growth and is emerging as a popular alternative accommodation type across Asia Pacific. JLL is expecting more new alternative accommodation disruptors in the region, who manage and lease flexible spaces, while adhering to hotel level standards.
“We’re extremely encouraged that the Asia Pacific hospitality market is recovering quicker than anticipated, but more interestingly, we’re witnessing a transformation of the sector to meet the demands of changing consumer behaviours and expectations. Hoteliers will increasingly need to readjust strategies to adapt and create a working environment that supports the health and wellbeing of its workforce in addition to prioritizing efforts that lower the industry’s carbon footprint and reduce climate risk,” says Xander Nijnens, Managing Director, Head of Advisory and Asset Management, Asia Pacific, JLL Hotels & Hospitality Group.