Australian hotel markets continue to feature as some of the most tightly held markets in the region, according to Jones Lang LaSalle Hotels' latest Hotel Investor Sentiment Survey (HISS). The Australian markets also feature prominently as those markets least favoured for building new hotels.

With such a positive trading outlook for most major metropolitan markets around Australia, investors are clearly committed to holding onto the hotel assets they own. This sentiment is reflected not only in Australia, but also throughout Asia Pacific.

The survey, which targets the world's 2,000 leading investors and owners of tourism properties, is the only global survey of its kind.

Trading Performance Expectations Remain Positive

Investor sentiment for growth in hotel trading performance across Asia Pacific remains overwhelmingly positive. Our analysis indicates short and medium term averages are at their highest level since April 2005 after three consecutive periods of sentiment. In Australia, the most significant change in sentiment was reserved for Melbourne where the recent Commonwealth Games have contributed to ongoing improvements in trading performance.

Melbourne has continued to trade exceptionally well in the post Commonwealth Games period and this trend is expected to continue into 2007 with the city's impressive events calendar and strong corporate and international demand all contributing to its success. Consequently, investors' positive outlook for continued growth in trading remains resolute.

Yields Show Little Change

Whilst interest rates have increased in some markets, on the whole, market fundamentals remain strong. The survey indicated that leveraged IRR expectations are lowest for Brisbane 15.2%, Melbourne 15.6% and Sydney 14.6%. Mature and relatively stable, assets in these markets are highly sought after.

Perennial favourite, Sydney, continues to attract the lowest expectations in Australia for initial yields at 7.6%.

A tightening in investor expectation was reported for just nine markets in the Asia Pacific region, of which amongst the most significant were Brisbane, Gold Coast and Auckland. However across the region investors are sending a clear message with the strongest sentiment yet that they expect that initial yields will increase over the next six months.

Australian Investors Wish to Build or Hold Hotels

Australian markets feature most predominantly as those markets least favoured for building. With office markets improving on the back of the strong economy, hotels are now even less likely to represent the highest and best use for available sites. However, investors are slightly more in favour of new hotel development in Brisbane. Whilst the most advanced in the hotel cycle of all Australian markets, to date new supply projects in Brisbane remain limited and available sites scarce.

Australian markets also continue to feature as some of the highest hold markets, with 54.8% and 50.0% of investors favouring this strategy in Melbourne and the Gold Coast respectively. As a consequence, competition to secure assets as they become available for sale remains intense.

Of all the markets across Asia Pacific, investors only favour selling as the primary investment intention in Bali, however with an equal proportion looking to hold.

Markets with the strongest sell sentiment include those affected by shocks including Fiji, Manila and Jakarta.

Other markets which have shown a decline in investor interest include Gold Coast and Auckland. Having topped the list for markets to buy in our last survey, Auckland now features as the only mature market in which investors want to build.

Asia

While investors remain bullish about short term trading in China and India, medium term expectations have softened for both. With interest in Vietnam on the rise following its recent invitation to become the 150th member of the World Trade Organisation, Ho Chi Minh City is the clear stand out for investors for medium term trading. Tokyo recorded one of the lowest leveraged IRR expectations at 15.1% whilst investors' expectations that initial yields will tighten further in Singapore, Osaka and Bangkok. The exception being that Bangkok may experience a decrease in trading performance over the short term following the New Year's Eve bombings. India is undoubtedly the top build destination, whereas investors are looking to acquire in North Asia.

David Gibson has specialised in the tourism and hospitality industry for over 28 years. His most recent experience has been to take project responsibility for significant acquisitions and sales of large hotels in the Asia Pacific region. He also has extensive involvement in the asset management of numerous hotels as well as fulfilling numerous consulting roles for key long term clients. For further information on Jones Lang LaSalle Hotels' latest Hotel Investor Sentiment Survey (HISS), please contact: Karen Wales, Vice President Research, Jones Lang LaSalle Hotels on 02-9220-8779 or visit our website:

www.joneslanglasallehotels.com

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