Asia Pacific hotel investments rebound 46% to reach US$12.1 bil in 2021

Asia Pacific hotel investment demonstrated a strong recovery last year (Photo: Samuel Isaac Chua/The Edge Singapore)

SINGAPORE (EDGEPROP) – Asia Pacific hotel investment demonstrated a strong recovery last year, according to data compiled by CBRE. The sector surged 46% y-o-y to reach US$12.1 billion ($16.4 billion) in 2021 as investors seek to ride the upside as the region’s borders re-open.

See also: Singapore tops Asia Pacific for 2021 outbound real estate investments totalling US$32 bil

Asia Pacific hotel investment volume (in US$ million)

“The sector offers attractive risk-adjusted yields and asset repositioning opportunities to investors seeking enhanced returns,” explains Steve Carroll, CBRE’s head of hotels & hospitality, capital markets, Asia Pacific. He adds that investors are increasingly turning to hotels as a way to hedge against inflation, given the sector’s shorter lease period compared to other property types.

As border restrictions ease, investors such as REITs, private offices and private equity firms are buying hotels to upgrade guest offerings in anticipation of the pent-up tourist demand. Some of the hotel assets purchased are also being converted towards other uses, such as co-living spaces. Underpinning this is the demand for cost-effective accommodation amid relatively inflexible rental markets, especially in cities like Singapore and Hong, notes Chris Ely, CBRE’s head of hotel asset management, Asia.

While the start of the year was impacted by the spread of the Omicron variant, travel momentum is expected to build in the coming months. Southeast Asia resort markets, in particular, are poised to lead travel recovery, with tourists leaning towards destinations with more spacious outdoor environments. For example, hotel occupancy and room rates at the Maldives have already returned to pre-pandemic levels, notes CBRE.

Revenue per available room of selected resort markets (as a % of that in corresponding months of 2019)

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To that end, the resort segment is expected to see substantial investment demand into the 2H2022 as competition for choice assets heat up on expectations of a full recovery in occupancy and visitor arrivals. On the flipside, investor sentiment towards urban hotels will likely remain cautious, “as companies maintain a cost-sensitive attitude towards corporate travel”.

CBRE also highlights that despite beingly adversely impacted by the pandemic, the Asia Pacific hotel sector has not seen material distress. Pricing expectations, including any discounts, are expected to reset in the coming months as hotel cashflows see a recovery to pre-pandemic income levels.

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