Mr. David Gibson The global credit markets shakeout has had little impact on sentiment for hotel investment in Asia Pacific with total hotel transaction volume increasing by 90.2% over 2006 to reach US$11.6 billion to date during 2007. Jones Lang LaSalle Hotels’ recently released Hotel Investor Sentiment Survey ("HISS") highlights investors’ ongoing enthusiasm for the hotel sector in both Australia and throughout Asia Pacific.
Hotel transaction activity in Australia has reached AU$1.4 billion for 2007 year to date, surpassing the 2006 total of AU$1.2 billion. In Asia Pacific, Japan has recorded the highest amount of hotel transaction activity to date totalling US$6.6 billion. A large portion comprises the Jones Lang LaSalle Hotels co-advised IHG / ANA portfolio transaction.
Short-term investment intentions are synonymous with the global trend. Although buy sentiment has declined, as hotel investors pause to see how the current flux unfolds, buyers still outweigh sellers by 5:1. Buy sentiment prevails in over half of surveyed markets, dominated by the regional investment hot spots of Australia, China, Japan and Singapore.
Investors around Asia Pacific remain bullish on short and medium term trading expectations with positive sentiment almost double that of Europe and the Americas. Continued urbanisation and development in Asia has the potential to drive economic growth for many years to come and while many forecasts suggest a slowdown in the US, Asia is perceived to be relatively protected from this.
As markets settle, this is likely to result in heightened attention from global investors in the Asia Pacific region. Markets that investors would like to acquire in include Melbourne, Sydney, Macao, Hong Kong, Guangzhou, Chengdu and Beijing, Tokyo, Osaka, Singapore, Shanghai and Ho Chi Minh City.
While leveraged IRR’s recorded no change, initial yields have softened slightly as investors seek higher upfront returns. One of the most significant changes was for Australia and New Zealand. Having spiked downwards earlier this year, at 16.0%, expected IRRs are at a level which is higher than the long-term trend and one not seen since January 2002, indicating that there has been a re-pricing of risk. In Australia, interest rates increased in November 2007 for the second time this year, and followed three rises in 2006.
Over the next six months investors expect initial yields to firm in only four markets - Manila, Bali, Fiji and Singapore. Investor expectations for initial yields in Singapore recorded their fourth consecutive tightening to be ranked the lowest in Asia Pacific, outside of Japan. Expectations for hotel trading performance in Singapore remain positive for 2008.
In Australia, investors expect higher initial yields with 7.5% in Sydney, 7.9% in Melbourne, 8.1% in Brisbane and Perth, and 8.4% in Gold Coast.
Across the region investors continue to favour upscale hotels however this survey has also been characterised by a marked uplift in interest in the luxury segment. However, increasingly budget hotels are being mooted as hot property across Asia Pacific, a trend that is reflected in our most recent survey with investors showing a penchant for them in Japan and secondary cities in China.
David Gibson has specialised in the tourism and hospitality industry for over 28 years. His most recent experience has been to take project responsibility for significant acquisitions and sales of large hotels in the Asia Pacific region. He also has extensive involvement in the asset management of numerous hotels as well as fulfilling numerous consulting roles for key long term clients. For further information on Jones Lang LaSalle Hotels’ latest Hotel Investor Sentiment Survey (HISS), please contact: Karen Wales, Vice President Research, Jones Lang LaSalle Hotels on 02-9220-8779 or visit our website: www.joneslanglasallehotels.com
