Asia Pacific’s hotel investment market recorded an impressive more than USD 9 billion worth of transactions back in 2013, led by the resurgence of Japan and big-ticket trophy deals in Singapore and Shanghai.1
However, 2014 witnessed a moderation in sales activity across the region, falling by 18% to just above USD 7.5 billion (over 34,000 keys traded at an average rate of USD 221,000 per key). This was largely the result of reduced sales volume in Asia, falling by USD 2.8 billion (y-o-y).
This decline in investment activity in Asia partly reflected a geographic shift of investment focus to recovering and emerging markets (such as the Americas and Western Europe) by Asian capital, rather than a diminishing interest in local hospitality assets.
Overall, activity in Asia was dominated by Japan (USD 2.3 billion), Mainland China (USD 1.4 billion), Thailand (USD 338 million) and Malaysia (USD 292 million).
In stark contrast to Asia, last year proved to be an extraordinary year for Australia. Transaction volumes reached a record USD 2.2 billion (up 86% y-o-y). The sale of the Sheraton on the Park hotel in Sydney to new Chinese heavyweight investor Sunshine Insurance Group is indicative of the high-profile acquisitions now occurring Down Under. Selling for USD 398 million, the transaction was a new record for a single-asset hotel sale in Australasia.
In 2014, Australia once again remained firmly on the radar of Mainland Chinese investors. However the growing interest in the USA and Europe was also evident with a flood of outbound capital chasing assets in several international gateway cities including New York, London and Paris.
Cross border investors dominated capital flow, accounting for two-thirds of all deals above USD 5 million. With 146 deals (both single-asset and portfolio transactions) registered in 2014 (94 in Asia), offshore investors have dominated large asset sales with a high average deal size of USD 55 million. The most active market by number of properties sold was Japan with over 100 hotels trading, many as part of a portfolio deal.
Driven by stable economic performance and relatively high yielding assets, many investors over the past two years have been attracted to opportunities in Australia. While Sydney and Melbourne saw the first flurry of investment in 2013, diminishing stock in these markets is forcing investors to look further afield and closed deals saw greater foreign activity in Brisbane and Perth last year.
Outside of the key gateways, Chinese investors are examining destinations with potential to attract increasing tourism. A weakening Chinese economy has pushed more developers and investors off-shore to South East Asia and Australasia.
For more interpretation on 2014 sales activity and other key trends across Asia Pacific, please see our upcoming publication “Hotel Investment Highlights March 2015”.
1 - USD 9.2 billion
Frank Sorgiovanni is the Head of Research at JLL’s Hotels & Hospitality Group in Asia, based in Singapore.
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