After declining to $31.8 billion in 2012 – a 5 per cent fall as compared to 2011 – global hotel transactions are likely to witness a rise to $33 billion in 2013, with activity supported by the primary investment markets of the US, UK, France, Germany, Japan and Australia despite economic uncertainties, says a Jones Lang LaSalle’s Hotel Investment Outlook report.
Asia Pacific hotel transaction volumes are projected to reach $3.5 billion in 2013 on the back of strong investment sentiment to buy hotel assets in the region, the report says. This projection represents an improvement on 2012 volumes, where hotel sales activity dropped 30 per cent on the previous year to $3.3 billion.
Australia and Japan are expected to see the lion’s share of investment dollars this year, while pockets of activity will be seen across the rest of the region. More investors will look to acquire or develop Asia Pacific hotel assets in 2013 as they seek to secure a foothold in the region, the survey findings suggest.
Among cities, Phuket, Ho Chi Minh City, Auckland, Osaka and Tokyo have emerged as the top cities where the investor appetite for acquisitions is strongest; while Asia Pacific hotel markets continue to rank among the highest globally for development sentiment, with Bali, New Delhi and Mumbai appearing in the global top ten.
| Hotel transaction volume forecast snapshot | |||
| 2012E | 2013F | Change (%) | |
| Americas | $17.5 | $18.5 | 5.7 |
| EMEA* | 11.0 | 11.0 | Nil |
| Asia Pacific | 3.3 | 3.5 | 6.1 |
| Global total | 31.8 | 33.0 | 3.8 |
All figures in US$ billion
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*Europe, Middle East and Africa
“While we are seeing strong investor appetite, sell intentions in Asia Pacific are the lowest of all the regions. This is attributed to a softening of yield and leveraged initial rate of return expectations. Consequently, we expect transactions of existing assets to be broadly consistent with 2012 next year and pick up in 2014,” said Scott Hetherington, CEO, Jones Lang LaSalle Hotels and Hospitality Asia.
Despite strong investor sentiment, a low level of established product for sale will widen the pricing gap between buyers and sellers and slow the pace of transaction volumes. In light of this, investors will continue to consider new developments in order to achieve sufficient scale across the region. Hotel supply in Asia is projected to increase by an average of 5.5 per cent per annum across 23 major markets over the next two years, the survey says.
Indian market
Asia remains the global hotel development hot spot with supply increase projected to average 5.5 per cent per annum across 23 major markets over the next two years. However, commencements have slowed in India, South East Asia and China as cities suffer indigestion following significant new hotel openings in recent years.
As regards the Indian hotel investment market, the dynamics in 2013 will favour both buyers and developers with a slowdown in development activity and more opportunities to acquire, the survey says. The exuberance which was evident in 2007 has also softened while demand catches up with supply.
Trading performance declined in some Indian markets through 2012 and is expected to moderate further in 2013. While the pricing appears reasonable, the rarity of transactions means that Indian hotel real estate is expensive and consequently a gap between buyer and seller expectations still exists.
While debt is available for the right project, banks remain cautious about lending to the sector and onerous terms continue to act as a stranglehold on the sector’s development. Any fundamental shift would therefore see liquidity increase.