Hotel sales and investments drop in first quarter
Print Edition
HOTEL sales and investment in the Asia Pacific region fell in the first quarter of 2016 amid major setbacks in Japan and China, according to a recent report released by international real estate consultant Savills.
Between January and March, investment sales totaled US$1.49 billion across the region, a year-over-year drop of 15.9 percent, Savills’ Asia Pacific Hotel Sales & Investment report showed.
Japan saw the most transactions with 73.5 billion Japanese yen (US$631.6 million) worth of sales completed in the three-month period, a decrease of 9.4 percent from the same period a year earlier.
The hotel market in Japan actually benefitted from the 47 percent increase in visitor arrivals from 2014 to 2015, mainly fueled by the increase in short-haul Asian visitors travelling to Japan more often but for shorter periods of time.
For example, nearly 5 million Chinese tourists visited Japan last year, a surge of 107 percent from 2014, making China, despite its domestic economic slowdown, the top visitor arrival growth nation to Japan.
While some investors believe that this may be the peak for hotel performance and asset prices in the run-up to the Olympics, others believe that this is just the beginning of increases in visitor arrivals from Asia. In late March, the Japanese government just raised their 2020 visitor arrivals goal for the second time, to 40 million arrivals, double the original forecast.
Meanwhile, four hotel transactions worth 1.45 billion yuan (US$223.8 million) were secured in China in the first quarter, a year-over-year decline of 17.7 percent. Major deals include Hong Kong-listed Top Spring Int’l Holdings’ acquisition of the 120-room Grand Pujian Residence from Real Estate Capital Asia Partners in Singapore for 576.3 million yuan.
More realistic exit strategies
The soft market conditions in China are due to the deterioration in hotel operational performance, the bid-ask gap, and the fact that investment underwriting criteria in China are different to international buyers’ criteria. However, due to the economic conditions, hotel owners in China have started to explore more realistic exit strategies, the report said.
Elsewhere in the region, Australia, New Zealand, Indonesia, Vietnam and Thailand all registered increases in transaction volumes.
Australia, which saw 16 deals with a total value of more than 486.4 million Australian dollars (US$344.6 million), had the second-highest transaction volume this quarter, accounting for 25.1 percent of the region’s total. That represented a 7.7 percent annual increase. New Zealand, at the same time, registered three transactions totalling 71.9 million New Zealand dollars (US$47.4 million), a 23.4 percent rise from same period a year earlier.
In Southeast Asia, Indonesia, Vietnam and Thailand all experienced year-over-year increases despite their still low transaction volumes, according to the report.
Looking forward, the region’s hotel investment sales market is expected to remain dominated by Japan and Australia and quiet in the near term in Southeast Asia and China, Savills said.
“The next quarter is likely to be dominated by sales in secondary cities in Japan and Australia,” the report forecasts. “The acquisition of assets in secondary locations was evident in the first quarter of this year and is likely to continue throughout the year as investors feel comfortable operating in secondary markets in pursuit of higher yields.”
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