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Asian hotel investments to rebound in 2013

Hotel investments in the Asia Pacific region are expected to rise in 2013, following a significant decline last year.

In its latest Hotel Investment Outlook report for 2013, Jones Lang LaSalle Hotels (JLL) revealed that regional trade activity in the hotel sector fell 30% to US$3.3 billion in 2012, largely due to inactivity in Japan and an absence of sales in Asia’s key gateways.

For 2013 however, Asia Pacific’s hotel transaction volumes are projected to rebound slightly, reaching US$3.5bn, above the 2012 volume but still below the recent short-term average of US$4.1bn. Australia and Japan will see the majority of investment, the JLL report stated, with new-builds also providing opportunities in the region.

“While the long-term fundamentals for Asia Pacific hotel markets remain strong – wealthier travelling middle class, improved connectivity, rapid urbanisation, rising education, high savings rate and lower taxes – there has been a subtle softening in trading performance across the region, tempering investor enthusiasm,” the report stated. “With such low levels of established product available for sale, investors continue to consider development in order to achieve sufficient scale across the region.”

According to JLL, Asia Pacific remains the “global hotel development hot spot”, with supply projected to increase 5.5% per annum over the next two years. It added however, that development has slowed in India, Southeast Asia and China as cities struggle to cope with the major influx of new hotel supply seen in recent years.

In the more developed markets of Australia and Japan however, high costs are keeping new supply levels low; a fact that will “continue to be an attractive driver for global investment capital”, according to the report.

Intra-regional investment will account for an estimated 70% of Asia Pacific’s total transaction volume in 2012, and JLL said it expected a large amount of regional investment to be “opportunistic rather than strategic”, with investors targeting markets where they see positive growth. Investors are looking at the expansion of low-cost carrier networks and where tourism infrastructure is being developed, it added.

Overall, Asia Pacific’s projected hotel investments of US$3.5bn will account for just 11% of global volumes, which JLL estimated will total US$33bn this year.


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