Asia Pacific hotel property assets showed a total annualised return of 7.7 percent for the year ending December 2012.¹

This was comprised of 7.5 percent income return and a positive 0.2 percent capital growth.

The December 2012 total return was 620 basis points lower than the previous year of 13.9 percent, and is a reflection of the subdued Japanese market, a slowdown in Revenue Per Available Room (RevPAR) growth in Asia Pacific, and a softening in the Australian market fundamentals.

"Given the strong performance in 2010 and 2011, a slight moderation in returns is unsurprising. That said, hotel investments are still offering healthy returns," said Ed Fitch, Executive Vice President, Jones Lang LaSalle's Hotels and Hospitality Group.

"Looking forward, investor appetite remains buoyant and we expect hotel transaction volumes to increase in 2013. We have already seen a significant number of transactions in gateway markets in Asia in the first quarter, and recent deals suggest stronger pricing. In that respect, we may expect to see capital growth driving hotel returns in the near future."

Dr Anthony De Francesco, Managing Director of IPD Australia and New Zealand said: "The lower investment returns experienced across Asia Pacific hotel markets reflect a slowdown in RevPAR growth. This is no surprise given occupancy and average room rates are reaching pre-GFC levels and, as such, cannot sustain previous growth. While market fundamentals are likely to remain solid throughout 2013, strengthening investor interest in the hotel sector is likely to see some firming in cap rates for good quality hotel assets in desirable locations."

Tony Ryan, Principal of Ryan Lawyers Singapore added, "While hotel performance remains strong, the rate of growth is moderating as hotels reach pre GFC levels. Hotel developments, in particular mixed use projects, are now very much an option in most Asian markets."




1 - According to the latest IPD Asia Pacific Hotel Property Index sponsored by Jones Lang LaSalle and Ryan Lawyers.