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Hotel M&As expected to continue, says JLL

THE FLURRY of hotel-industry mergers and acquisitions seen in 2016, with high-profile deals such as Marriott International’s acquisition of Starwood Hotels & Resorts and HNA Tourism Group Co’s purchase of Carlson Hotels, is likely to continue this year, according to JLL.



“Hotel brands will always look to bolster their supply pipeline and the surest way to grow is often by acquiring operators with management and franchise contracts,” said Lauro Ferroni, senior vice president of the JLL Hotels & Hospitality Group.
He said portfolios with a full range of offerings from service levels to geography are most attractive to investors. 
Frank Sorgiovanni, head of research for Asia-Pacific, added: “We expect to see more consolidation among operators and real-estate owners alike due to key players’ need to remain competitive through efforts that align growth strategies.
“Investors from Asia will continue to feature in 2017, with groups from Singapore at the fore. Hong Kong-based buyers with capital connected to Mainland China stand to be active as well.” 
Hotel investment volumes in the Asia-Pacific region are projected to remain in the range of US$8 billion to $9 billion (Bt280 billion to Bt315 billion) this year, in line with the $8.5 billion transacted in 2016. China is still a significant player even as the Chinese government announced tighter measures on outbound capital in mid-December for “non-core” business activities.
According to JLL, Chinese appetite for hotel real estate remains. The potential weakening of the yuan means investors will be on the lookout for opportunities in the United States and Europe as a way to maximise returns. Chinese investors will always be seeking trophy assets in global markets such as New York, London, Paris, Hong Kong, Tokyo and Sydney.
Chinese capital will be active across global hotel markets, but overall deal flow will slow, especially for transactions above $1 billion, because of tighter capital controls. 
“China is embarking on a massive policy shift designed to stem outbound investment,” Sorgiovanni said.
Investors are keenly watching for buying opportunities in Japan and Australia this year. Japan is expected to see one or two trophy asset deals as well as limited service hotel portfolios enter the market; Australian cities have more hotels coming online to alleviate the supply crunch in the face of greater demand stemming from growing tourism numbers, particularly in Sydney and Melbourne.
“Thailand, Vietnam, Hong Kong and Singapore continue to record solid trading performance and strong tourism growth fundamentals. In fact, Singapore hit a record high for tourist arrivals last year,” Sorgiovanni said. “The long-term arrivals profile is proven with both leisure and corporate travellers across resort markets and financial hub cities.”
Malaysia, Cambodia and Myanmar, where several high-profile transactions took place last year, are also prompting increased interest as inbound arrivals grow year on year, although corporate travel to Kuala Lumpur has been affected by the price crunch in the oil and gas industries.
Research from JLL reveals that alternative accommodation platforms such as Airbnb and Homeaway account for about 10 per cent of room bookings in top global markets. The hotel industry will be looking at creative partnerships with these alternative accommodation platforms such as AccorHotels’ acquisition of Onefinestay in 2016.

Published : February 22, 2017