Building momentum

CBRE expects to see a further improvement in hotel investment volume as investors seek greater exposure, with the weight of capital chasing Asia Pacific hotels now at an all-time high.

In 2021, Asia Pacific hotel investment grew 46 per cent year-on-year to US $12.1 billion. As borders in the region reopen, the hotel sector has a great opportunity to profit as investor confidence grows and purchasers seek assets with excellent risk-adjusted returns. The hotel industry is quickly becoming one of the most sought-after for value-added investors, according to CBRE’s Asia Pacific Hotel Outlook.

The first few months of 2022 have seen several Asia Pacific markets start to ease travel restrictions, shorten quarantine periods, or offer quarantine-free entry to fully vaccinated tourists. This has been the case, particularly in several Southeast Asian countries, with resort markets expected to benefit from pent-up travel demand and lead the travel recovery. Certain markets are opening up more gradually. Outbound tourism from mainland China, for example, will remain limited in the near term which will have implications for economies that are heavily dependent on this source market.

Nonetheless, as many markets in the region continue to ease travel restrictions and reopen borders, improvements in visitor arrivals and room occupancy rates will begin to emerge in the second quarter of this year. Southeast Asian leisure markets are expected to outperform as pent-up travel demand is unleashed. The need for more spacious outdoor environments has seen destinations such as the Maldives already return to prepandemic levels of hotel occupancy and room rates.

With an industry recovery in APAC on the cards, hotels will soon welcome a different type of traveller. Flight to safety is likely as consumers gravitate toward brands they know and trust because of the rigour in which they manage hygiene and safety across their portfolios. There will also be a greater emphasis on technology, whether for ensuring hygiene and safety for leisure guests or for enhancing conference room and business meeting capabilities for business travellers. Growing environmental and social awareness among consumers is another emerging trend that will drive further ESG adoption in the hotel sector and shape future transactions in this space.

There will be a further improvement in hotel investment volume as investors seek greater exposure, with the weight of capital chasing APAC hotels now at an all-time high. The sector offers attractive risk-adjusted yields and asset repositioning opportunities to investors seeking enhanced returns. Hotels have also gained appeal as a potential inflation hedge due to the sector’s uniquely short lease period, measured in days rather than months or years as with other property types. On the back of the steady reopening of borders and easing of travel restrictions, inquiries are growing from investors keen to acquire choice assets ahead of a full improvement in occupancy and visitor arrivals, with this segment to attract substantial investment demand in H2 2022.

Southeast Asian leisure markets are expected to outperform as pent-up travel demand is unleashed”