Asia Pacific hotel investment to cross $10 billion in 2023
JLL forecasts annual hotel investments to decline by 14%
SINGAPORE, 26 October, 2023 – Hotel investments in Asia Pacific will cool to $10.1 billion for 2023 due a variety of external factors, representing a year-on-year decline of 14%. According to JLL’s (www.jll.com) Hotels & Hospitality Group’s recently published Hotel Investment Highlights Asia Pacific, a decline in both transactions and investment volumes versus 2022 is largely attributable to the combined headwinds of interest rate increases, cost inflation, and macroeconomic uncertainty.
JLL data and analysis suggest that most major metrics are down in 2023 year-on-year. As of October 2023, total investment volumes tracked by JLL stood at $5.9 billion significantly down on the same time period of 2022 of $9.8 billion. The average price per key or room was also less during 2023 to-date at $291,600 versus $368,900 in 2022. According to JLL, 130 hotel transactions have been recorded across 13 markets in Asia Pacific, down from 168 deals during the same period in 2022. Furthermore, the number of hotel keys transacted in 2023 year-to-date stands at 24,800 versus 27,990 during the comparable time in 2022.
“The post-pandemic recovery of the Asia Pacific hotel industry has been extremely encouraging in 2023 but the strong performance of the sector is not translating into comparable investment volumes. Investors have more frequently cited higher borrowing costs, lingering inflation and the uncertainty of the global economy as influencing factors during the past 18 months and we’re now witnessing concerns translate into a more subdued investment market. However, we believe investor confidence remains very high longer-term due to strong operating performance and traveller demand,” says Nihat Ercan, CEO, JLL’s Hotels & Hospitality Group, Asia Pacific.
Business performance of the market stands as further testament to the longer-term confidence of investors in the hotel sector. As of YTD September 2023, revenue per available room (RevPAR) recovery is at 95% of pre-pandemic levels, with many markets far ahead of this number and setting new RevPAR benchmarks, and with average daily rates (ADR) reaching new highs.
Japan’s hotel market has performed strongly year-to-date with RevPAR already ahead of pre-pandemic levels and transaction volumes crossing $2.2 billion. The luxury and resort markets are resurgent with a c. 30 to 40% increase in average daily rate (ADR) on average compared with 2019, prompting JLL to forecast $2.9 billion in transactions in Japan for the full year.
Investment activity has been more muted in Australia and New Zealand, despite strong ADR growth and steady occupancy recovery in major cities. Year-to-date, JLL estimates investment volumes of $960 million and forecasts 2023 activity to close at over $1.7 billion.
Hong Kong’s reopening represents more of a stable recovery in the hotel sector, with visitor arrivals now exceeding 2019 and RevPAR in the luxury segment on par with pre-pandemic levels. JLL believes that transactions in Hong Kong will finish 2023 at $900 million as lingering concerns about rates offset the return of travellers to the territory.
Singapore hotel’s solid operating performance, with RevPAR up 13% versus 2019, has been one of Asia Pacific’s least traded major markets. Despite the closing of PARKROYAL on Kitchener Road, which represented the largest single-asset transaction in Singapore, transactions volumes are expected to decline by 45% in 2023 to $500 million as assets remain tightly held.
The Maldives was one of the first markets to recover following the pandemic and tourism is up a further 14% so far this year. After a strong year of transactions in 2022, the investment volumes are now projected at $95 million for 2023, down 54%, yet with a number of transactions in the pipeline.
“While ongoing macroeconomic volatility has suppressed short-term hotel investment volumes, fundamental performance continues to accelerate. Looking to the balance of 2023 and 2024 ahead, there are more tailwinds than headwinds including a levelling of interest rates, high amounts of impending debt maturity and substantial levels of dry powder capital, which will influence investment decisions. We’re confident of ongoing recovery in the sector and see investment volumes crossing $10.4 billion in 2024,” says Ercan.
For over 200 years, JLL (NYSE: JLL), a leading global commercial real estate and investment management company, has helped clients buy, build, occupy, manage and invest in a variety of commercial, industrial, hotel, residential and retail properties. A Fortune 500® company with annual revenue of $20.9 billion and operations in over 80 countries around the world, our more than 105,000 employees bring the power of a global platform combined with local expertise. Driven by our purpose to shape the future of real estate for a better world, we help our clients, people and communities SEE A BRIGHTER WAYSM. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.