Recovery of regional hotel spending
Sector has growing appeal as an inflation hedge, CBRE survey finds
Asia-Pacific hotel investment made a comeback in 2021, growing 46% year-over-year to $12.1 billion. The steady rebound has been supported by a growing volume of capital seeking to increase exposure to the sector, according to the latest research from property services group CBRE.
“Hotels are among the sectors poised to benefit from the region’s reopening of borders,” said Steve Carroll, head of hotels and hospitality at CBRE’s capital markets division in Asia-Pacific. . “The sector offers attractive risk-adjusted returns and asset repositioning opportunities for investors seeking higher returns.
“Hotels have gained appeal as a potential hedge against inflation due to the industry’s particularly short lease term, measured in days rather than months or years for other property types.”
CBRE sees the hospitality sector rapidly emerging as one of the most sought after by investors looking for value-added opportunities. Supported by a steady reopening of borders and an easing of travel restrictions, investors, including real estate investment trusts, private offices and a growing number of private equity players, are acquiring hotels to improve their deals in anticipation. pent-up tourist demand, as well as the conversion of certain hotel assets into offices and co-living spaces.
CBRE is seeing increased conversion of assets into co-living space, particularly in Hong Kong and Singapore, where there is demand for cost-effective housing in a relatively tight rental market.
“For Thailand, hotel owners and developers are re-examining ways to make better use of space in light of the new post Covid-19 normal, or are otherwise considering selling their assets,” said Atakawee Choosang, hotel manager. at CBRE Thailand.
“For existing hotels, many operators and investors have taken advantage of the pandemic-induced lull in customers to upgrade and renovate in preparation for the full return of customers, investing capital to implement new technologies such as intelligent systems as key points of differentiation.”
As countries further ease restrictions and reopen borders, Southeast Asian resort markets are expected to benefit from pent-up travel demand and lead the travel recovery. The preference of health-conscious travelers for more spacious outdoor environments has led destinations like the Maldives to already return to pre-pandemic hotel occupancy levels and room rates.
CBRE expects the resort segment to see substantial investment demand in the second half of 2022 as competition for prime assets intensifies due to expectations of a full market recovery. occupancy and visitor arrivals.
By contrast, investor sentiment remains cautious on city hotels, which are expected to lag the overall recovery, while businesses remain cost-sensitive on business travel.
Lenders in some markets are taking a more optimistic view of the sector, with major Australian and Japanese institutions extending funding to experienced hotel investors. Pricing expectations, including discounts, are expected to reset in the coming months as hotel cash flows return to pre-pandemic revenue levels.
“With recovery on the cards for the industry, hotels will soon be welcoming a different type of traveler post-pandemic,” Mr Carroll said. “There will be a greater focus on technology, whether to ensure the health and safety of holidaymakers, or to improve the capacities of conference rooms and business meetings for business travellers.
“Rising consumer environmental and social awareness is also another emerging trend that will drive ESG adoption in the hospitality industry and shape future transactions in this space.”