Hotel transactions in Asia to maintain 2011 levels

In the Asia-Pacific, bullish enthusiasm took hold of the investment landscape for the region. Hotel transaction volume across Asia Pacific is projected to reach $5 billion this year, a similar level to 2011. Of this, Asia is projected to reach $3.5 billion as long-term owners continue to make strategic dispositions in Southeast Asia and bank motivated sales gain traction in Japan. 

According to Mike Batchelor, managing director of Investment Sales Asia, Jones Lang LaSalle Hotels, following a “V-shaped recovery” in 2010, growth in Asia-Pacific economies moderated through 2011 and is projected to continue to do so in 2012. Strong domestic economies are also resulting in emerging sources of capital with offshore hotel investments made by players from China, Hong Kong, India, Indonesia, Japan, Malaysia, Pakistan, Singapore, South Korea and Thailand. 

He added that Asian investors have invested a total of $7.5 billion in global hotel real estate since 2009, accounting for 26 per cent of total cross-border investments and the highest proportion for any source region. This trend is likely to gain pace in 2012 as more groups look to deploy capital offshore to take advantage of displaced global hotel markets.

Activity in Thailand is projected to increase as some counter-cyclical buying opportunities emerge. The political environment is more stable and trading is expected to rebound over the next 12 to 18 months, notwithstanding the impact of the recent flooding disaster in Bangkok. Similar to Hong Kong and Singapore, some offshore and long-term Thai owners are looking to exit to redeploy elsewhere capital offshore. Vietnam will also see some activity although inflationary challenges make it a hard proposition for international investors and the market will continue to be dominated by domestic players. The fundamentals are good but further investment in infrastructure is needed to support the strong economic growth that has been evident in recent years.

In the past two years, Jones Lang LaSalle Hotels have successfully completed several high-profile transactions in Thailand, including the Laguna Beach Resort Phuket, Dusit Thani Laguna Phuket, Baan Taling Ngam Samui and the Sofitel Silom Bangkok.

Batchelor said, so far, the dislocation in the financial markets has not impacted underlying trading fundamentals in Thailand. This has reassured investors to a certain degree and has underscored the attractiveness of high quality, income-producing hotel real estate as an asset class.

He added that constraint will be driven by illiquid markets and the shrinking balance sheet capacity of international banks to lend significant sources of new money. Still, the market in Asia will be flush with equity capital that will come into play. We expect single asset sales across the gateway markets of Bangkok, Phuket, and Pattaya to be the main centres of activity following a similar pattern in 2011.