Asia Pacific hotel investment to top $7 billion in 2021, growing to $9 billion in 2022

Hotel investment volumes will likely cross US$7 billion for the full year 2021, a 15% year-on-year increase, as investors continue to look past the industry’s short-to-medium term headwinds brought on by COVID-19. According to JLL Hotels & Hospitality Group, healthy transaction volumes will continue into next year, with the industry expected to attract a minimum of US$9 billion in capital in 2022.

In its recently published Hotel Investment Highlights 2H21, analysis shows that year-to-date 2021 volumes have totaled US$6.34 billion. Investment in the region has been spread across 127 transactions and 12 countries, representing approximately 21,000 keys. However, average price per key has declined year-on-year according to JLL, decreasing to US$303,000 to $369,000.

“The Asia Pacific hotels industry is well primed for an investment resurgence that will gather momentum in 2022. While COVID-19 will continue to impact the industry and influence capital deployment, investors are increasingly viewing the current environment as an opportunistic time to get deals done,” says Mike Batchelor, CEO, Asia Pacific, JLL Hotels & Hospitality Group.

Activity in 2021 has been dominated by transactions in China, Japan and Australia, which year-to-date have accounted for 67% of total volume in the Asia Pacific. China currently stands as the most active investment market in the region, with US$1.52 billion in sales in the year to date, Japan, long the number one destination for regional hotel investment, attracted the second largest amount of capital, despite seeing a decline in year-to-date transaction volume, with US$1.48 billion in hotel transactions. Australia was the third most active market, accounting for US$1.26 billion in investments in 2021 thus far.

“In our interactions, buyers are viewing the external backdrop as the start of a new investment cycle for the hotels space. However, the region remains characterised by a sizeable bid-ask spread, as owners are bolstered by relatively low gearing and strong lender relationships. As a result, sellers are holding for higher pricing while waiting for market conditions to improve. All and all, we remain extremely confident on the sector’s longer-term appeal,” says Nihat Ercan, Senior Managing Director, Head of Investment Sales, Asia Pacific, JLL Hotels & Hospitality Group.

According to JLL analysis, cross-border capital has been playing a larger role in transaction activity this year and will continue to expand its presence in the Asia Pacific hotel space in 2022. New pools of capital continue to emerge, such as family offices and investors from Europe and the Middle East, which haven’t traditionally been active in the sector, providing another layer of investor eyeing opportunity in the hotel space.