Investments in Asia Pacific hotels recover to pre-pandemic levels; China’s Slip Holds Bigger Gains

Asia-Pacific hotel investments have rebounded from pandemic lows in the first half of 2022, helped in part by struggling investors’ purchases of guesthouses from struggling sellers, global real estate consultancy JLL said in a report today. A decline in hotel investment in China has held back further gains.

Overall, first-half investment in the region increased 33% year-on-year to $6.8 billion and gained 11.9% over 2019, “demonstrating a return to pre-pandemic levels of deployment of capital in the Asia-Pacific hotel industry,” said JLL.

There were 75 transactions in the first half of 2022, down 20% from the previous year and 33% from the first half of 2019 numbers, reflecting a trend towards larger purchases. The total number of rooms transacted during the first six months of 2022 was 19,822, up 29.9% from the first half of 2021 and up 9.4% from the pre-pandemic period of 2019, JLL reported. .

“The increase in business activity was influenced by an increase in portfolio transactions as institutional investors sitting on dry powder look to apply their capital more efficiently,” said JLL. Japan ($1.8 billion), Korea ($1.7 billion) and Greater China ($1.6 billion) received the most capital in the first half of 2022.

In mainland China, however, hotel transactions from a year earlier declined by 43.8% to about 7 billion yuan, due to strict Covid control measures in many cities, JLL said. (See related post here.) As a result, many hotel transactions are likely to be delayed to Q4 of this year or Q1 of 2023, he noted.

The company estimates that China’s hotel transaction volume will increase to approximately 13.5 billion yuan for the full year 2022. .

Struggling sellers will also attract buyers looking for low prices. “Many developers (chose) to divest their non-core hotel assets in an attempt to alleviate their financial difficulties, thus attracting a large number of high net worth investors actively seeking opportunities in quality hotel assets at discounted prices,” Zhou Tao said. , Managing Director, Hotels and Hospitality Group, JLL Greater China.

Some Tier I and Tier 1.5 cities in China have seen a boom in rental property investment activities, and hotel assets are highly sought after by investors looking for rental property conversion opportunities, JLL said.

A growing number of loss-making hotel projects in Tier 2 and Tier 3 cities are being sold through judicial sale, which has attracted interest from asset management companies seeking investment opportunities in distressed hotels, JLL said.

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