The sales pace should moderate in 2016 as investors play it safer.
Hong Kong has had an impressive hot streak in hotel investment sales, even clinching the second-largest transaction worldwide in 2015, but the acceleration will likely abate this year. Hong Kong hotel investors, for one, are taking a “wait-and-see’ approach due to the flailing inbound tourism from Mainland China, says Craig Collins, chief executive officer, Australasia at Jones Lang LaSalle.
“Over the past few years, Hong Kong has been increasingly reliant on Mainland Chinese visitors. Consequently, Hong Kong’s tourism and hotel market is vulnerable to the impact from a Chinese economic crisis, changes in travel preferences of the Chinese or jeopardised political links with Mainland China,” says Collins. He expects limited growth in trading performance in all sectors as visitor arrivals continue to be weak, including leisure demand which has so far continued to show a decline in 2016.
Collin reckons Hong Kong visitations from Mainland China have declined partly because of the removal of unlimited Hong Kong entry to Shenzhen residents back in April, and amending it to only
one visit a week. Tempering the interest spike Analysts are arguing that the pessimism on inbound tourism and the state of the local economy will temper the interest spike among investors, many of whom flocked the market and hunted for deals in 2015. The past year was one of the strongest years in Asia Pacific hotel investment with total value of investment sales increasing 1.2% year-on-year to US$9.04 billion, according to Simon Smith, senior director, research, Asia Pacific at Savills Research.
The majority of the Asia Pacific transaction volume came from 4 countries: Japan, Hong Kong, Australia and China, in descending order. Hong Kong recorded US$2.24 billion in hotel investment sales or 24.8% of the region’s total volume and at a whopping 677% increase from the previous year. In contrast, while Japan still led the region with US$2.46 billion in sales or a 27.2% share in the region, this was 2.6% lower than the previous year. The explosion in Hong Kong transaction volume was led by the sale of one of Hong Kong’s premier luxury hotels, InterContinental Hong Kong, which sold for $938 million.
Collins says this was the largest single hotel transaction in Asia Pacific and the second largest in the world. Selective investors Investors will continue to keep Hong Kong hotels within their radar, based on pwc’s Emerging Trends in Real Estate In 2016 Asia Pacific report. The survey respondents indicated ‘fair’ investment prospects for the hotels sub-sector with a a 3.30 rating out of 5. This was only slightly lower than the ratings of the industrial/distribution (3.56 rating) and office (3.37) subsectors, and slightly higher than the ratings of the residential for sale (3.08), apartment residential (3.07) and retail (3.07) subsectors. The lowest rating of 1 means ‘abysmal’ investment prospects and the highest rating of 5 means ‘excellent.’
Who made it to HKB’s list?
L’hotel Nina et Convention Centre remains the city’s largest hotel based on number of rooms. It has 1,608 rooms this year. The list welcomes a new entry - the Hong Kong Harbour Hotel at 47th place which has 500 rooms.
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