Investors bullish towards APAC hotels market amidst COVID-19 impact

Nearly 70% are interested in flowing capital into the sector this year.

In spite of the pandemic’s pressure on the tourism and hospitality sectors, 70% of investors are hopeful about the long-term future of Asia-Pacific’s hotels industry, according to real estate and investment management firm JLL.

Investors are reportedly keen on extending capital into the sector this year, with a forecast $9.45b (US$7b) in transactions, higher by 20% YoY compared to 2020’s $7.83b ($5.8b).

Japan and Southeast Asia are eyed as the “most desirable” hotel investment markets in APAC, at 52% and 46%, respectively, mainly driven by high demand and positive long-term fundamentals. On a similar note, Australia (31%) and China (22%) are also viewed favourably.

“Optimism around the deployment of vaccines and an eventual recovery in tourism has started to drive activity and investors don’t want to miss the opportunity. At the same time record amounts of capital have been raised to be deployed into the real estate sector in general, including into hospitality,” said Nihat Ercan, senior managing director and head of investment sales for APAC at JLL.

Approximately one in four investors express a more cautious approach in deploying capital due to the uncertainties surrounding the industry’s future as caused by COVID-19, whilst 5% are planning to exit the sector altogether and target other asset classes instead.

Pricing and financing will be notable considerations for investors, said JLL, noting that “the gap between buyer and seller price expectations will narrow as distress becomes less likely, whilst sellers come to terms with the impact of operating cash flow on pricing.”

More than 80% of investors polled are looking at discounts of 20% – 30%, whilst sellers are forecasted to more about 10% in asking prices.

“The past year has been all about protecting cash flow and this will continue for the coming 12 to 18 months — seasoned owners realise that now is the time to invest in existing hotels, with little displaced business. However, it is a balancing act in keeping operating costs flexible, whilst investing ahead of the recovery to edge in front of competitors and meet guest needs,” said Xander Nijnens, managing director and head of advisory and asset management for APAC at JLL.