Increase in hotel investment reflects growing optimism in APAC: CBRE

INVESTOR sentiment towards hotels has improved in recent months following a challenging 12 months after the onset of the pandemic, said CBRE in an update on investment figures for Asia Pacific hotels for the first half of this year.

Regional hotel transaction volume reached US$2.3 billion in Q2 2021, representing a decline of 5.1 per cent quarter-on-quarter. Japan, mainland China, Korea and Australia accounted for the bulk of sales volume during the quarter.

Major deals include Blackstone's acquisition of eight hotels in Japan for approximately 60 billion yen (S$732.6 million) and the forward purchase of a super luxury hotel, Tokyo Torch, for about 56 billion yen by Mitsubishi Estate and Tokyo Century.

Highlights in Australia included the A$620 million (S$611.4 million) purchase of the Travelodge portfolio by Salter Brothers under a new joint venture with GIC and Partners Group (on behalf of its client).

More investment opportunities are set to emerge. Outrigger Hospitality Group signalled its return to Thailand with its purchase of a local Thai resort brand with three resorts, noted CBRE. The properties will be rebranded and are expected to reopen before the end of the year.

"The gap between buyer and seller expectations still exists but it is narrower compared to 2020. There continues to be a large quantum of capital looking for returns in the hotel sector. With hotel prices having remained stable in some markets such as Australia or in resort destinations like the Maldives, this indicates that yields might have fallen," said CBRE.

It added that it expects hotel investment demand to increase in the coming months as end-user demand improves on the back of rising vaccination rates and expectations of an economic recovery.

But while the rollout of Covid-19 vaccines is restoring some confidence in travelling and contributing to the gradual easing of travel restrictions in some markets, the situation remains highly uncertain, it said.

Asia Pacific recorded the largest decline in arrivals of any region for the first five months of 2021, with the number of visitors falling 86.2 per cent year-on-year.

Many countries have already commenced staged reopenings. The Maldives was the first destination in the Asia Pacific to open its international borders (Jul 15, 2020); in Thailand, the Phuket Sandbox initiative was launched in July this year; and Singapore reopened its borders to fully vaccinated travellers from Germany and Brunei in September.

The regional tourism market will experience a staged recovery, said CBRE. For countries with a large pool of domestic travellers (such as Australia, New Zealand, mainland China and Japan), local leisure travel will be the first segment to recover.

The next segment to recover will likely be corporate travel, with many markets already permitting special exemptions for business travellers. That being said, the MICE segment is unlikely to experience a recovery in the short-term, due to corporate budget constraints and a reluctance on the part of many people to participate in large-scale in-person events, it noted.

In terms of hotel occupancy, overall occupancy was 49.5 per cent for the 12 months ended July 2021, compared to 70.2 per cent in the same month of 2019.

Outperformers included Singapore, which registered occupancy of 72.2 per cent thanks to government contracts for hotel rooms generated by stay home notices and quarantine orders.

Regional average daily rate fell to USS$77.78 on a 12-month rolling basis for the year ended July 2021, representing a decline of 22.2 per cent year-on-year.