Hotel investment in Asia Pacific is rising on the back of a strong tourism rebound.

Investment volumes in the first half of the year hit $5.7 billion, up 19% from the year earlier, according to JLL data.

This follows an uptick in tourism. International visitor arrivals in Asia Pacific are projected to reach a new high of 741 million this year, surpassing pre-pandemic levels for the first time, data from the Pacific Asia Travel Association (PATA) shows.

“With tourism thriving once again, investors are pouring back into the region, fuelling a surge in hotel investment volumes,” says Nihat Ercan, CEO, APAC, JLL Hotels & Hospitality Group. “This sets the stage for a robust hotel market in the years to come.”

Japan emerged as the region's hottest hotels market in the second quarter, capturing over half of all transactions, JLL data shows. A notable deal in April saw American private equity giant KKR acquire a 14-hotel portfolio from Japanese developer Unizo Holdings.

In May, Japan welcomed more than three million visitors for the third straight month, marking a 60% increase compared to the previous year.

But it’s not just tourism attracting investors to Japan. A weaker yen and cheaper debt financing, compared to other global markets, make it a prime target for cross-border investors seeking attractive returns, according to Ercan.

“Japan offers investors the opportunity to achieve positive carry, as property yields exceed borrowing costs,” says Ercan. “This is a rare find globally and makes Japan a compelling investment market.”