Strong first half for hotel transaction volumes in Asia

July 10, 2013 / By

Recent analysis by the Hotels & Hospitality Group of 2013 sales activity shows heightened investor sentiment and the best first-half for transactions recorded since 2008 in Asia. The weight of capital chasing investment grade hotels in the more established tourism markets (Singapore, Hong Kong and Tokyo) and opportunistic deals in emerging markets (Thailand and Maldives) accounted for the bulk of this activity.

Japan in particular witnessed higher sales volumes on previous years, underpinned by the widespread view that local market trading fundamentals continued to improve post the 2011 earthquake. The increase in visitations regionally via a growing interest in travel among the middle class of various emerging economies is also driving hotel performance, particularly in Southeast Asia.

During H1 2013, around USD1.3 billion has transacted throughout Asia. In comparison, the result was some USD600 million above that recorded during the first half of 2012. Singapore accounted for 44% of regional transactions, largely due to Park Hotel Clarke Quay (USD238 million), the second largest transaction of the year so far, after the 90% sale of Hilton Tokyo Bay in Japan (USD346.6 million).

Thailand continued to consolidate its position as an established hotel investment market, most notably with the recent sale of the Laguna Beach Resort in Phuket. While having somewhat of an unpredictable investment environment, Thailand is increasingly emerging as one of Asia’s hotel investment hot spots. Transaction volumes are expected to remain robust over the short term.

Looking forward, the availability of investment grade hotels (particularly in Singapore and Hong Kong where investor demand is highest) and the willingness of sellers to close deals through transparent processes in emerging markets will dictate the overall investment landscape. Whilst not only targeting cornerstone assets, investors are looking closer at emerging markets in a bid to acquire yield accretive investments because of the improving levels of transparency.

The Maldives in particular is on the radar of many of our clients and the Hotels & Hospitality Group recently sold the Angsana Velavaru for USD71 million. We anticipate this market will continue to witness increasing investor interest over the next 12 months.

Transactions in China, India and Indonesia have been held back by challenging ownership structures and not surprisingly, sales activity in China is significantly down on previous years. Investment in China has averaged approximately USD800 million annually since 2008. So far in 2013, confirmed sales volume is around 10% of this.

Throughout the Asian region, we are also aware of circa USD400 million in hotel transaction volumes to be confirmed in a matter of weeks and a further USD700 million in due diligence.

More on transaction activity and cross capital border flows can be read in our latest June 2013 pulse publication “Asia Hotel Investment (H1 2013)” which I encourage you to look at for an in depth analysis of the hotels and hospitality sector across Asia.

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