Of the total transaction volume in Asia, approximately 70% originated from properties located in China, Japan and South Korea, and most were bought by domestic investors.

Despite the dominance of domestic investors, foreign investors were increasingly active in countries such as Japan and South Korea.

Private equity firms and property companies were the biggest investors in terms of transaction volume during the first nine months of 2018, investing USD1.6 billion and USD1.5 billion in the hotel space respectively.

Ownership remains tightly-held in some key markets such as Singapore. With Singapore trading performance on the upswing, especially for the luxury segment, investor appetite for the city is unlikely to subside and frustrated capital will continue to push pricing higher.

Likewise, the strength of the New Zealand market meant that capital markets activity was limited. With strong trading performances in Auckland and Queenstown, these remain as the key focus areas for developers in the market.

Properties in China represented slightly more than a quarter of the transaction volume as of September 2018. The sale of Ariva Beijing West Hotel & Serviced Apartments in Beijing was the biggest transaction for the period; transacting for USD242 million or USD765,000 per key.

Another notable transaction was the sale of the Novotel & ibis Beijing Sanyuan by Ascendas Hospitality Trust (A-HTRUST) to a joint venture between Huazhu Hotels and TPG Capital amounting to USD186 million. The purchase price represented a 100% premium over its latest valuation and was more than 1.5 times higher than the initial purchase price in 2012 – the property will likely be converted to office-use.

South Korea has seen a steady flow of transactions during the period, primarily in Seoul. Foreign investors in the South Korean market are also becoming increasingly active, as exemplified by Ascendas Hospitality Trust’s acquisition of KY-Heritage Hotel Dongdaemun in Seoul. Properties that exchanged hands in Thailand were located in Bangkok and Phuket, the country’s most active investment markets. The largest transaction in 2018 was the sale of the Bangkok Edition Boutique Hotel to King Power for USD202 million at a price per key of USD1.3 million.

Transactions in Japan consisted of mainly leased limited-service hotels located in Sapporo, Tokyo, Osaka and Fukuoka. These properties were typically sold to institutional investors who favour stable fixed income. Japan REITs were relatively active in 2018, comprising almost 20% of the buyer pool in terms of volume.

Deal flow in Australia during the first nine months of the year was relatively subdued, largely due to the limited availability of institutional grade stock. Nevertheless, investor interest remains strong in Sydney and Melbourne. Approximately USD671 million worth of properties transacted during the period, with total transaction volume projected to hit just under USD800 million for the whole of 2018.

The largest deal that transacted during the period was a cross border transaction - Bell City Hotel Melbourne was sold for USD119 million by investment fund, Elanor Investor Group, to Gaw Capital.

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