APAC Hotel Deal Volume Down 51% in First Half on Economic Woes, Costlier Financing

Hotel investment volume in Asia Pacific tumbled 51 percent year-on-year to $3.13 billion in the first half of 2023 as macroeconomic challenges and the rising cost of debt stubbed out dealmaking in the hospitality segment, according to JLL.

Japan bucked the regional trend, with investment activity in the country’s hotel sector jumping 56 percent year-on-year to $1.54 billion during the January-June period, while volume in Australia and New Zealand surged 189 percent to $820 million, the consultancy said Monday in a release. But Singapore saw investment dive 95 percent to $30 million as China’s fell 76 percent to $300 million.

Nihat Ercan, APAC CEO at JLL’s hotels and hospitality group, said the agency witnessed a continued disconnect between robust tourism demand and macroeconomic and geopolitical challenges in the first half, resulting in a gap between sellers’ pricing expectations and buyers’ access to capital.

“However, trading performance of the sector remains strong and other fundamentals including tourism arrivals and high occupancy rates provide us with full confidence that the current investment environment is externally-based, rather than industry-specific,” Ercan said.

Big in Japan

The region’s big-ticket hotel transactions in the first half included KKR and Gaw Capital Partners’ acquisition of the Hyatt Regency Tokyo from Odakyu Electric Railway for a reported JPY 57.1 billion ($410 million), as well as BentallGreenOak’s purchase of the Rihga Royal Hotel Osaka for around JPY 50 billion ($360 million).

In June, JLL announced the completion of Southeast Asia’s first hotel portfolio sale of 2023 — the five-star Pullman Jakarta Central Park in the Indonesian capital and the Ibis Saigon South and Capri by Fraser in Vietnam’s Ho Chi Minh City — for a combined $106.1 million as Thailand-listed Strategic Hospitality REIT liquidated its assets.

The Singapore hotel market stirred to life earlier this month as Pan Pacific Hotels Group, the hospitality arm of property giant UOL Group, announced the sale of the Parkroyal on Kitchener Road in Little India for S$525 million ($389 million) in the city-state’s largest hospitality deal ever. The buyer, Midtown Properties, is a subsidiary of Worldwide Hotels, which started out as a “love hotel” operator and now owns and runs 38 properties across Singapore under six brands including V Hotel and Hotel 81.

The month of July also brought news of the year’s first hotel transaction in the Maldives, with Crystal Plaza Resorts selling Amari Havodda Maldives to Thailand’s Minor International and its financial partner, the Abu Dhabi Fund for Development, for a reported $60 million.

Resilient Travel Recovery

The United Nations World Tourism Organization expects the travel recovery to continue throughout 2023 despite economic, health and geopolitical challenges, JLL said.

Taking into account factors including the macroeconomic environment and the project interest cycle, coupled with broad investor interest in strong-performing assets, the consultancy has revised its full-year forecast for APAC hotel investment to $8.7 billion, down 24 percent from its initial estimate.

“Approaching 2024, we expect to see more specific opportunities emerge in some destinations across Asia Pacific, where prices have been adjusted downwards, enabling interested parties to reconsider,” Ercan said. “Investors remain very committed to the Asia Pacific hospitality sector and we see ongoing appetite among buyers to invest in key markets and strategic assets, with the ability to deploy capital.”