Asia Pacific hotel investments set to surpass $12 billion in 2024

Hotel investments in the Asia Pacific region are anticipated to exceed $12 billion in 2024, indicating robust growth and confidence in the hospitality sector. This upward trend highlights the area's resilience and attractiveness to investors, driving significant development and expansion in hotels and resorts across key markets. The increase in investment reflects the ongoing demand for accommodations as travel and tourism continue to recover.

According to recent data from JLL, hotel investment volumes in the Asia Pacific region for the entirety of 2024 are expected to increase by 4.3% compared to 2023, which had a total of $11.7 billion.

For 2024, Asia Pacific hotel investments are projected to reach $12.2 billion, driven by a surge in investment activity, an improved interest rate environment, and generally positive macroeconomic and microeconomic developments that enhance regional confidence in the sector.

The hotel investment market in Hong Kong remains active this year, but buyers have become more discerning, focusing on hotels located in prime city center areas. JLL predicts that investment volumes will be around $500 million in 2024, approximately 35% lower than in 2023. As the current wide bid-ask spreads are expected to narrow and tourism in Hong Kong is anticipated to improve, 2025 is expected to see increased investment activity.

Oscar Chan, Head of Capital Markets at JLL in Hong Kong, stated, "Currently, Hong Kong has high vacancy rates in many hotels, especially in the three- and four-star categories, mainly due to shifts in tourist spending habits. The latest Policy Address introduced a pilot program to encourage converting hotels into student accommodations by simplifying the planning and building application process, which is expected to generate more investment interest and attract developers to invigorate the market."

In the first nine months of 2024, total transaction volumes reached $9.05 billion, marking a 15% increase from $7.87 billion in 2023, and representing 90% of the transaction volume seen in 2019. Driven by significant transactions in Asia, cross-border investments surged, particularly in Japan, while Australia saw a rare decline in yearly activity.

Nihat Ercan, CEO of the Hotels & Hospitality Group for Asia Pacific at JLL, added, "A mix of broader economic factors, including a positive macroeconomic outlook for the region, supportive interest rate policies, and strong consumption trends, gives us confidence that total hotel investment will significantly exceed last year’s figures. Investors consistently show a strong interest in larger investments within the Asia Pacific hotel sector, and we anticipate no slowdown in activity during the last quarter of 2024. As a result, we have raised our investment volume forecast to $12.2 billion."

JLL's analysis indicates that average daily rates (ADRs) in the Asia Pacific have risen by 19% in local currencies compared to the last peak in 2018-2019. Additionally, most markets still have potential for occupancy to return to pre-pandemic levels, supported by strong business travel that offsets some decline in leisure travel. However, JLL believes that the final stage of occupancy recovery may take longer, particularly with the MICE (Meetings, Incentives, Conferences, and Exhibitions) sector lagging behind and Mainland China facing ongoing short-term economic challenges that affect overall industry performance.

Looking at individual countries, investment volumes have generally been positive in the first nine months of 2024, with a few exceptions across the Asia Pacific:

Japan: In the first nine months of 2024, Japan solidified its position as the most attractive hotel market in the region, with sales volumes reaching $3.8 billion by the end of September. With investor interest expected to remain high, JLL forecasts total sales of $4.7 billion for 2024, followed by a 4% increase to $4.9 billion in 2025. Despite the recent interest rate hike and slight yen appreciation, JLL anticipates continued activity in Japan’s hospitality investment market due to strong supply and demand fundamentals.

Mainland China: By the end of September 2024, investment in Mainland China's hotel sector reached $1.8 billion, marking a 6.4% increase from the previous year. Shanghai and Beijing continued to be the most active hotel investment markets, accounting for over 50% of total transaction volumes. High net worth investors remain a prominent buyer demographic in the hotel asset market, and momentum is expected to carry into the last quarter of 2024, with total hotel transaction volumes projected to hit $2.1 billion for the full year.

Australia: JLL’s analysis suggests that Australian sales volumes will stay relatively low in 2024. Year-to-date volumes have amounted to $629 million (settled), a decline of 38% from the same period last year. JLL estimates that total transaction volumes will reach about $1.1 billion for the entire year, which is below the long-term average, possibly influenced by the classification of many 2024 transactions as “last year” deals.

Korea: Hotel transaction volumes in Korea have reached approximately $1.1 billion so far in 2024, with the Conrad Seoul being the largest transaction. JLL expects several more hotels to be sold before the year ends, projecting an estimated total transaction volume of around $1.3 billion for 2024.

Singapore: Thanks to a booming tourism industry, supported by major events and high occupancy rates, Singapore continues to attract investors. Transactions in 2024 have already surpassed last year’s totals, prompting JLL to project a cumulative hotel investment volume of approximately $1 billion for the year.

India: Transaction volumes have surged from $76 million in 2022 to $337 million in 2023, with JLL forecasting $440 million for 2024. This growth is backed by strong performance in room rates, revenues, and occupancy levels within the sector. Additionally, there is strong development interest, with hotel brands signing agreements for approximately 19,500 new hotel rooms in the first half of 2024, which accounts for 77% of the total signed in 2023 in emerging metros.

Thailand: After a decline in investment volume in 2023 due to a wide bid-ask spread and rising interest rates, there has been a significant rebound in investment activity in 2024. Year-to-date transaction volumes stand at $404 million, with a projected total exceeding $450 million for the full year. JLL anticipates that 2025 will meet or surpass the 15-year average of $300 million in transactions, supported by expected lower interest rates and positive tourism sentiment from visitors in the region.

Ercan concluded, "Factors such as fluctuating currency exchange rates against the US dollar have made the region more appealing to foreign investors since the first half of 2023. The robust resurgence in tourism fundamentals in the region following the reopening of borders for international travel has also bolstered investor interest. While some markets may experience short- to medium-term declines in occupancy, the overall industry has entered a new phase characterized less by recovery and more by sustainable and organic growth."

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Source: worldpropertyjournal‍