Hotel investment in Asia-Pacific staged a comeback in 2021, growing 46% year-on-year to reach US$12.1 billion. The steady rebound was underpinned by a growing volume of capital seeking to increase exposure to the sector, according to the latest research by the property services group CBRE.
"Hotels are among the sectors poised to benefit as the region's borders reopen," said Steve Carroll, head of hotels and hospitality in the capital markets division of CBRE in Asia-Pacific. "The sector offers attractive risk-adjusted yields and asset repositioning opportunities to investors seeking enhanced returns.
"Hotels have gained appeal as a potential inflation hedge due to the sector's uniquely short lease period, measured in days rather than months or years for other property types."
CBRE sees the hotel sector fast emerging as one of the most sought-after for investors eyeing opportunities for added value. Buoyed by a steady reopening of borders and easing of travel restrictions, investors including real estate investment trusts, private offices, and a growing volume of private equity players are acquiring hotels to upgrade offerings in anticipation of pent-up tourist demand, as well as converting some hotel assets into offices and co-living spaces.
CBRE is seeing increased conversion of assets into co-living spaces, particularly in Hong Kong and Singapore where there is demand for cost-effective accommodation amid a relatively inflexible rental market.
"For Thailand, hotel owners and developers are re-examining ways to better utilise spaces in light of the new norm post Covid-19, or otherwise exploring potentially selling their assets," said Atakawee Choosang, head of hotels with CBRE Thailand.
"For existing hotels, many operators and investors have taken advantage of the pandemic-induced lull in guests to upgrade and refurbish in preparation for the full return of guests, investing capital to implement new technology such as smart systems as key points of differentiation."
RECOVERY MOMENTUM
As countries further relax restrictions and reopen borders, Southeast Asian resort markets are expected to benefit from pent-up travel demand and lead the travel recovery. Health-conscious travellers' preference for more spacious outdoor environments has resulted in destinations like the Maldives already returning to pre-pandemic levels of hotel occupancy and room rates.
CBRE expects the resort segment to see substantial investment demand into the second half of 2022 as competition for choice assets heats up on expectations of a full recovery in occupancy and visitor arrivals.
In contrast, investor sentiment remains cautious towards urban hotels, which are expected to lag the overall recovery while companies maintain a cost-sensitive attitude towards corporate travel.
Lenders in some markets are adopting a more optimistic view towards the sector, with mainstream institutions in Australia and Japan extending financing to experienced hotel investors. Pricing expectations, including any discounts, are expected to reset in the coming months as hotel cash flows recover to pre-pandemic income levels.
"With recovery on the cards for the industry, hotels will soon be welcoming a different type of traveller post-pandemic," said Mr Carroll. "There will be a greater emphasis on technology, whether for ensuring hygiene and safety for leisure guests, or for enhancing conference room and business meeting capabilities for business travellers.
"Growing environmental and social awareness among consumers is also another emerging trend that will drive further ESG adoption in the hotel sector and shape future transactions in this space."
