In its annual publication, Hotel Investment Outlook 2012, JLLH notes that global hotel investment volumes surged impressively in the first half of 2011, with real estate investment trusts (REITs) leading the way and signs of debt market revival encouraging activity.
Economic uncertainty in the second half of the year caused momentum to falter, the report noted, though deals continued, especially in the United States, reaching US$31 billion worldwide, an increase of 17 per cent over 2010 volume.
“In Asia Pacific, bullish enthusiasm took hold of the investment landscape for the region,” JLLH noted in launching the report. “Hotel transaction volume across Asia-Pacific is projected to reach US$5 billion [B155 billion] in 2012, a level similar to 2011.”
Mike Batchelor, JLLH Managing Director Investment Sales Asia, noted, “Following a V-shaped recovery in 2010, growth in Asia-Pacific economies moderated through 2011 and is projected to continue to do so in 2012.
“Strong domestic economies are also resulting in emerging sources of capital with offshore hotel investments being made by players from China, Hong Kong, India, Indonesia, Japan, Malaysia, Pakistan, Singapore, South Korea and Thailand.”
He added, “Asian investors have invested a total of US$7.5 billion [B233 billion] in global hotel real estate since 2009, accounting for 26 per cent of total cross border investments and the highest proportion for any source region. This trend is likely to gain pace in 2012 as more groups look to deploy capital offshore to take advantage of displaced global hotel markets”.
Activity in Thailand is projected to increase as some countercyclical buying opportunities emerge, JLLH predicts.
“The political environment is more stable and trading is expected to rebound over the next 12 to 18 months, notwithstanding the impact of the recent flooding disaster in Bangkok.
“As in Hong Kong and Singapore, some offshore and long-term Thai owners are looking to redeploy funds elsewhere. Vietnam will see some activity, though inflationary challenges make it a hard proposition for international investors and the market will continue to be dominated by domestic players.
“The fundamentals are good but further investment in infrastructure is needed to support the strong economic growth that has been evident in recent years.”
In the past two years, JLLH has completed several high-profile transactions in Thailand including the Laguna Beach Resort Phuket, Dusit Thani Laguna Phuket, Baan Taling Ngam Samui and the Sofitel Silom Bangkok.
Mr Batchelor said, “So far, the dislocation in the financial markets has not impacted underlying trading fundamentals in Thailand. This has reassured investors to a certain degree and has underscored the attractiveness of high-quality income-producing hotel real estate as an asset class.”
He added, “Constraint will be driven by illiquid markets and the shrinking capacity of international banks to
lend significant sources of new money.
“Still, the market in Asia will be flush with equity capital that will come into play. We expect single asset sales across the gateway markets of Bangkok, Phuket, and Pattaya to be the main centres of activity, following a similar pattern in 2011.”