Asia Pacific 1H 2022 hotel investment up 33% year-on-year as market moves above pre-pandemic levels

Shanghai, July 27, 2022 – Recovery in Asia Pacific’s hotel sector continued to accelerate in 2022 with investment volumes for the first half of the year totaling $6.8 billion. According to JLL (NYSE: JLL) data and analysis, investments in the first half of 2022 represent 33.0% growth year-on-year and an 11.9% increase on 2019, demonstrating a return to pre-pandemic levels of capital deployment into the Asia Pacific hotels sector.

In total, there were 75 transactions in the first half of 2022, down 20.2% year-on-year and 33.0% on the first half of 2019 numbers. However, the total number of rooms transacted during the first six months of 2022 was 19,822, representing an increase of 29.9% versus the first half of 2021 and 9.4% during the pre-pandemic period in 2019. The increase in deal activity was influenced by a spike in portfolio transactions as institutional investors sitting on dry powder seek to deploy their capital more efficiently. However, according to JLL, ongoing momentum will likely be challenged by growing macroeconomic and geopolitical headwinds in the second half of 2022.

Investment activity was spread across various Asia Pacific markets as the opening of borders ensured that many markets transition from reliance on domestic demand towards inbound leisure and corporate business. However, the conflux of current favorable travel market conditions and the longer-term economic outlook is creating a disconnect between buyers’ and sellers’ expectations around pricing.

From an investment volume standpoint, Japan ($1.8 billion), Korea ($1.7 billion), and Greater China ($1.6 billion), received the most capital in the first half of 2022. Singapore ($899.7 million), Maldives ($205.5 million), and Indonesia ($159.6 million) continued to recover strongly. Activity in Australia ($145.5 million) and Thailand ($37.7 million) was more subdued but will likely be bolstered in the second half due to numerous marque deals closing.

“A more sustainable recovery in travel will intensify the largest challenge faced by many investors of successfully deploying capital into investment grade product across the region. We remain steadfast in our conviction that total Asia Pacific hotel investment volume will cross the $10 billion mark despite the scarcity of assets coupled with macro and geopolitical headwinds that will continue to influence capital activity,” says Mike Batchelor, CEO, Asia Pacific, JLL Hotels & Hospitality Group.

In China, year-on-year hotel transaction volume decreased by 43.8% due to strict control measures in many cities as a resurgence of Covid cases in first half of the year. As a result, many hotel transaction activities will likely be delayed to the fourth quarter of this year or the first quarter of 2023. According to JLL, China’s hotel investment volumes totaled \7 billion yuan in the first six months of 2022. The firm estimates that China’s hotel transaction volume will be approximately \13.5 billion yuan for the full year of 2022.

Zhou Tao, Managing Director of Hotels & Hospitality Group, JLL Greater China, says "The shortened quarantine period for inbound visitors and the ease of domestic travel restrictions signal a steady recovery of the overall hotel market. The pent-up demand for leisure and business travel will drive growth in hotel operating performance, and boost the confidence of hotel investors.”

“Under the combined impact of China’s “Three Red Lines” policy and Covid resurgence, many developers opt to divest their non-core hotel assets in an attempt to ease their financial distress, hence attracting a large number of high net-worth investors actively seeking opportunities in quality hotel assets at discounted pricing. Some institutional investors have identified growing level of distress amongst domestic hotel owners due to the prolonged impact of the pandemic and are starting to consider debt investment opportunities, offering cash-strapped hotel owners a new financing option.” Says Junya Wei, Vice President, Investment, Hotels & Hospitality Group for JLL Greater China.

Some Tier I and Tier 1.5 cities in China have seen a boom in rental housing investment activities. Hotel assets are highly sought-after by investors looking for rental housing conversion opportunities. Meanwhile, more loss-making hotel projects in Tier-2 and Tier-3 cities are being sold through judicial sale, which has attracted interest from asset management companies seeking distressed hotel investment opportunities.