to 3Q2023 Hotel transactions in Asia Pacific plunged 51% in 1H2023, according to a research report by JLL. The decline was due to macroeconomic challenges and the increasing cost of debt, in spite of supportive market fundamentals. China experienced a drop of 76% y-o-y to US$300 million, while Singapore saw a 95% y-o-y plunge to US$30 million. However, the sale of Parkroyal on Kitchener Road for US$388 million is expected to boost the market in the year’s second half.
Despite the weakened investment activity in 1H2023, trading performance in the hotel industry had improved due to higher average daily rates across the Apac region, with China reopening in January. JLL predicted full-year 2023 investment volumes to be US$8.7 billion, a 24% lower than its initial estimate.
Recent transactions demonstrate the emergence of promising opportunities. JLL advised on the sale of Amari Havodda Maldives resort to Minor International Public and their financial partner Abu Dhabi Fund Development. They also completed Southeast Asia’s first hotel portfolio sale in 2023 for US$106.1 million.
These positive developments in line with the stabilization of macroeconomic challenges could mean that hotel investment activity in Apac will start to pick up again. Nihat Ercan, CEO, Asia Pacific, JLL Hotels & Hospitality Group believes that “We have observed the impact of a continued disconnect between the robust tourism demand and macroeconomic and geopolitical challenges in the first half of 2023, resulting in a gap between sellers’ pricing expectations and buyers’ access to capital.” With prices adjusted downwards, potential buyers can consider these opportunities with more flexibility.
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Japan sustained robust hotel investments, growing 56% y-o-y to US$1.54 billion. Similarly, hotel investments in Australia and New Zealand rose, with volumes surging 189% y-o-y to US$820 million. This served as a positive contrast against the bleak figures in Singapore and China.
Ercan further adds that, “Approaching 2024, we expect to see more specific opportunities emerge in some destinations across Apac, where prices have been adjusted downwards, enabling interested parties to reconsider.”
In conclusion, despite the weaker investment volumes in 1H2023, the Apac hotel industry has seen signs of improvement due to adjusted pricing and the reopening of China. With potential buyers taking these opportunities, Apac hotel investment activity may improve finally in the foreseeable future.