$12b in hotel deals expected in Asia-Pacific: Study

The Asia-Pacific region is expected to host about US$8.5 billion (S$11.8 billion) in hotel investments this year, down 5 to 10 per cent from last year, according to a new report.

The action will not be here, however, as Singapore's tightly held stock means deals will be few and far between. But Japan, which racked up record levels of hotel transactions last year, will remain the stand-out market, while the growth in China should continue, said a JLL Hotels and Hospitality Group study.

"In 2015, the headlines featured blockbuster acquisitions of high-profile, gateway market hotels by investors from mainland China, Hong Kong and the Middle East," said Mr Scott Hetherington, chief executive of JLL Hotels and Hospitality, Asia.

"This year, we expect transaction activity across the region will slow somewhat, with a likely shift to secondary markets in South-east Asia and the Indian Ocean."

More than 33,000 hotel rooms changed hands in the region last year at a total value of US$9.2 billion.

Japan, followed by Australia and Hong Kong, led the pack. Some of the big-ticket transactions included the sale of the InterContinental Hong Kong for US$938 million and the Westin Sydney for A$445 million (S$440 million). An increasing amount of money has been coming from investment and private equity funds, JLL noted, adding that the continued consolidation of hotel brands will be an ongoing trend this year.

Last year, Marriott purchased Starwood and Accor acquired the Fairmont hotels group.

"Hotel brands are on a never-ending quest to bolster their pipeline and with the natural attrition in properties and limits to new supply growth, the surest way is often by acquiring operators with strategic management or franchise contracts," said Mr Mark Wynne Smith, global chief executive of JLL Hotels and Hospitality Group.

In Japan, deals should continue to come with demand from domestic real estate investment trusts, private equity funds from the United States, South-east Asian families and Chinese investors. China has also been recording hotel trades worth about US$1 billion annually, which should continue or even rise this year, JLL said.

Australia will remain active, although given the large number of prime assets sold to long-term holders recently, fewer hotels will be on the market. Hong Kong investors are likely to take a wait-and-see approach as hotel performance there has largely peaked, but there could be increasing interest in secondary markets, with investment opportunities coming up in countries such as Thailand, the Maldives and Mauritius, JLL said.

Rennie Whang

A version of this article appeared in the print edition of The Straits Times on February 11, 2016, with the headline '$12b in hotel deals expected in Asia-Pacific: Study'. Print Edition | Subscribe