HOTELS & TOURISM | Staff Reporter, Singapore

Cross border investments still measly in Asia Pacific's hotel real estate

It's only a quarter of overall volume.

It has been observed that cross border investors have accounted for around 50% of deal flow in Asia Pacific hotel real estate over the past decade, and that H1 2014 saw a moderation in activity in line with higher levels of activity in China and Japan, which is predominantly domestic.

According to a research report from JLL, as a result, cross border investments accounted for only a quarter of the total transaction volume during the first six months of 2014.

The report noted that Australia continues to attract the highest capital inflows with cross border investors the dominant purchasers of hotel real estate over the past six years.

The source of offshore capital is also shifting with greater inflows from China; a trend JLL expects to gain pace over the coming year.

Cross border investment in Asia Pacific is predominantly intraregional, the report noted, and that while inter-regional capital spiked pre-crisis, it has remained limited over the past five years.

Notwithstanding, JLL noted that groups from outside the region are increasingly revisiting investments in Asia Pacific hotel real estate.

Here's more from JLL:

As was the case pre-crisis, private equity/investment funds are most active, but with interest from some more traditional groups and new HNWIs.

These buyers are very openminded towards investing in the region but the challenge will be securing investment opportunities with an adequate level of return, particularly those targeting double-digits IRRs.

New sources of intra-regional and domestic capital are also emerging as Asian corporates look to place large capital reserves into alternative investment classes.

Many companies have experienced strong trading in their respective industries and this is leading some to consider investing in hotels, buoyed by the strong growth story.

A recent example was the sale of the Hilton Hua Hin to Saha-Union, in a deal brokered by JLL. Hilton Hua Hin is a prime beachfront resort located in the heart of Hua Hin town, a popular weekend getaway for affluent Thais and expatriates.

The Thai listed textile group acquired the 17-story, 298-room hotel which provides all of the 298 rooms with uninterrupted sea-views.

The hotel also benefits from unique zoning as Hua Hin no longer permits the construction of high-rise towers within close proximity to the beach.

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