19/02/2016

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Deal-making in Asia’s hotel sector set to cool to US$8.5b in 2016: JLL

Transaction volumes in Asia-Pacific’s hotel industry is likely to fall 8 per cent from the previous year to US$8.5 billion in 2016, says global real estate consultancy Jones Lang LaSalle (JLL).

SINGAPORE: After a year of explosive growth, deal-making in Asia-Pacific’s hotel industry looks set to cool modestly in 2016, with global real estate consultancy Jones Lang LaSalle (JLL) tipping transaction volumes to reach US$8.5 billion.

This marks an 8 per cent decline from the previous year, where hotel transactions in the region totalled US$9.2 billion after more than 33,000 hotel rooms changed hands last year.

“In 2015, the headlines featured blockbuster acquisitions of high-profile, gateway market hotels by investors from mainland China, Hong Kong and the Middle East. We also saw a high volume of hotel deals in Japan with increasing interest from foreign investors,” Mr Scott Hetherington, CEO of JLL Hotels & Hospitality for Asia, said in a press release on Feb 10. “This year, we expect transaction activity across the region (to) slow somewhat.”

In particular, hotel transaction volumes in Hong Kong are likely to have reached its peak following a record year in 2015, which witnessed the blockbuster transaction of InterContinental Hong Kong for US$938 million in July. Investors eyeing the Hong Kong market will adopt a “wait and see” approach in 2016, according to JLL.

Deals in Singapore’s tightly-held hotel sector is also likely to be “few and far between” amid a lack of available assets, the report added.

Among the brighter spots in the region, Japan will likely continue to see high volumes of transactions on the back of strong demand from domestic investors and US private equity funds. In addition, industry experts are seeing rising appetite from Chinese investors for hotels in second-tier Japanese markets.

Australia is also poised for a rosy year, with offshore interest expected to continue in the months ahead especially for the coveted Sydney and Melbourne markets. Overseas investors have been pouring cash into the hotel sector down under, with one of the largest deals being the sale of Westin Sydney for US$314.14 million to a joint venture between Singapore developer Far East Land and Hong Kong-based Sino Land last May.

In India, a change in the country’s hotel landscape and improvements in operations will provide the impetus for more acquisition and consolidation in some cities, according to JLL. Secondary markets in Southeast Asia and the Indian Ocean will also come under the radar of investors as interesting opportunities surface in Thailand, the Maldives and Mauritius, the real estate consultancy added.

Meanwhile, the trend of consolidation will likely persist across Asia-Pacific after a string of deals, namely Marriott International’s acquisition of Starwood Hotels & Resorts Worldwide for US$12.2 billion and the purchase of Fairmont Raffles Hotels International Holdings (FRHI) by Europe’s largest hotel operator Accor for US$2.9 billion, shook up the industry in 2015.

Both deals will have a huge impact on the hotel operating landscape in Asia Pacific, JLL said.

“Hotel brands are on a never-ending quest to bolster their pipeline and with the natural attrition in properties and limits to new supply growth, the surest way is often by acquiring operators with strategic management or franchise contracts,” said Mark Wynne Smith, Global CEO of JLL’s Hotels & Hospitality Group.

GLOBAL OUTLOOK

Beyond Asia, the volume of global hotel transactions is expected to hit US$70 billion this year, lower than 2015’s US$85 billion.

JLL predicts hotel transaction volume in the Americas to fall 20 per cent to US$37 billion in 2016, while the market of Europe, the Middle East and Africa (EMEA) is set to see US$25 billion worth of hotel trades, down 15 per cent from the prior year.

“We expect 2016 to be another strong year, although investors’ desire to buy is more measured,” said JLL’s report, which noted that the recent turmoil in global stock markets could weigh on investor sentiment.

“Investors are starting to consider what holding assets through a down cycle will look like and making more careful considerations around financing structures … but the underlying hotel market fundamentals remain positive.”

Picture Source: French hotel and services group Accor bought Fairmont Raffles Hotels International Holdings (FRHI) for US$2.9 billion last December. (AFP/Loic Venance)
Source copied from: http://www.channelnewsasia.com/news/business/international/deal-making-in-asia-s/2502938.html

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