Asia Pacific Hotel Business Investment

Asia Pacific Hotel Business Investment reached US $ 4.5 billion in the first 6 months of 2020. More than half of the investment value comes from local buyers in Japan, China and Australia. Based on the JLL report, investors are facing increasingly severe challenges in making investment decisions amid geopolitical uncertainty.

To achieve the return target, a number of investors have evaluated risk expectations in order to seize opportunities in their respective countries.

The hotel business in Japan recorded the highest volume of domestic transactions in the Asia Pacific region, amounting to US $ 1.14 billion during the first 6 months of 2020. Of this, REITs (real estate investment trusts) account for nearly half of the total value invested in the market.

The main factor in buying a property lies in its location

The main factor in buying a property lies in its location. This is because the location determines the selling price and future investment of a property. For example investing in property in Bali which is an international tourist destination. In fact, Bali has a wide target market in terms of foreign and domestic tourist visits.

What kind of location should you choose if you want to invest in a four-star hotel on the Island of the Gods? Choose a location near the beach because four-star hotels that are located close to the beach have characteristics of high occupancy or occupancy rates. Not to mention the high room rate or hotel room rates per night.

Foreign and domestic tourists from 34 provinces in Indonesia will choose the location of the hotel where they stay close to the beach. Moreover, they can get a sea view.

Department in Hospitality

Asia Pacific Hotel Business Investment growing due to low borrowing costs and expectations of sustainable market growth

This amount came from a number of business deals, including the acquisition of Hilton Tokyo Odaiba worth US $ 563.50 million by Japan Hotel REIT Investment Corporation and the purchase of Hotel Oriental Express Osaka Shinsaibashi for US $ 25.20 million.

Demand from Japanese institutional investors is growing due to low borrowing costs and expectations of sustainable market growth which are underpinned by large-scale events to be held in the country, such as the 2019 Rugby World Cup, Tokyo 2020 and 2025 World Expo, CEO of Asia, JLL Hotels & Hospitality in a written report.

An estimated 12 percent increase in international visitors to Japan in 2019 will continue to spur local investors to explore hotel business opportunities in big cities such as Tokyo and Osaka during the rest of the year.

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Taking into account the value of the land, the payback for hotel is around 12 years. It could even be longer because land prices have skyrocketed recently. Compare this with the amount of funds needed to build a middle-class hotel, amounting to Rp. 600 million per room unit. With an average number of rooms of 200 units, the required investment value is around Rp 120 billion. Much lower than luxury hotel investment. The payback period is about 7 years. That is with the assumption that the net room rate per night is IDR 700 million.

Asia Pacific Hotel Business Investment targeting hotel assets to be used as alternative facilities such as offices

Following in second place as the market with the largest trading volume in the region is China, which recorded a domestic investment volume of US $ 1.10 billion. In the first quarter of 2020, local internet giant JD.com bought the Beijing Jade Palace for US $ 400 million. The hotel will be converted into a multi-purpose office at the end of the year.

This agreement was part of a series of domestic investments targeting hotel assets to be used as alternative facilities such as offices. By calculating the price per square meter in China, hotel assets tend to be worth less than other commercial properties.

Due to the low yield profile of these transactions, foreign investors are likely to exit the hotel market resulting in more domestic transactions in China.

Furthermore, domestic investors dominated the hotel sector in Australia in the first half of 2020. This sector has long been the target of foreign investors with an investment value of nearly 80 percent of the total value of US $ 388.20 million.

Domestic hotels targeted include the NEXT Hotel Brisbane, the Hilton Surfers Paradise, the MACq 01 Hotel, and the Mayfair Hotel Adelaide. Craig Collins, CEO of Australasia, JLL Hotels & Hospitality explained that the size, location and types of assets offered in the first half of 2019 are in line with the wishes of local investors. That’s why they are so dominant.

While domestic investors continue to be very active, the Australian hotel investment market remains a strong focus for foreign investors. Based on the projected transaction activity for the second half of 2019, we estimate that international capital will dominate hotel acquisitions for the rest of this year.

Location is very influential with quiet and crowded hotels that you will make an investment. To choose a location it is recommended to choose a hotel that is close to tourist attractions. Because in general, hotels that are close to tourist attractions will always be crowded with tenants, especially during long holidays.

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