Hotel investment deals hit three-year high at $518.7m in 2018

Investors are embracing hotel assets as the residential segment loses luster.

The Lion City saw a total of eight hotel investment deals with transaction volume reaching $518.7m which is the highest since 2015 as real estate investors embraced hospitality assets over the slowing residential segment, according to CBRE’s hotel marketview.

Most of the investment deals were within the small mid-tier and economy segments, as well as boutique shophouse hotels, such as 84-key Porcelain Hotel, 41-key Wangz Hotel and 29-key Wanderlust Hotel.

“The momentum continued in 2019 with major deals currently in the midst of the transaction process, namely Ascott Rafles Place as well as the two Oxley-owned hotels, Novotel on Stevens and Mercure on Stevens at $353.3m and $950m, respectively,” the report’s authors said. “With URA’s revised revised guidelines and introduction of cooling measures in the residential market in July 2018, diversification into hotel assets has been gaining traction from real estate market players.”

Also read: Oxley's $950m hotel divestment could see 4.7% gross yield: analyst

An expected 2,000 rooms are expected to enter the pipeline in 2019, notably the YOTELAIR Changi Airport, EDITION and three of Far East’s hotels in Sentosa, comprising of Village Hotel and The Outpost Hotel in Q1 2019 and The Barracks Hotel by Q3 2019..

Several properties have also been made available for sale in recent months such as 343-key Andaz Singapore, a 25-key freehold boutique hotel in Little India and 241-key Ibis Novena, CBRE highlighted.

The hospitality business received a significant boost from strong tourist numbers which hit 18.5 million in 2018. The Indian market continued to be Singapore’s fastest growing tourism source, accounting for 7.8% of the total market share in 2018, according to CBRE.