Global hotel investment drops 52% in H1 2016
THE Asia Pacific region was the largest source of outbound capital in the global hotel real estate market as international economic and political uncertainties weighed on other regions, with much of the investment being redeployed to growing economies like the Philippines, according to a report by Jones Lang Lasalle.
In the report, Asia emerged as the only region to post growth in its hotel investment volumes in the first half of the year at 13 percent. This brought investment volumes to $3.8 billion compared with the $3.3 billion posted last year.
Some of the investment went into developments by Bangkok-based Dusit International in Davao, Cebu, and Metro Manila scheduled to be opened between now and 2019.
“The first six months of 2016 have seen Asia become the largest source of outbound capital flowing into global hotel real estate, with China overtaking the Middle East in terms of outbound hotel investment, making a sign of the country’s long-term strategy to secure income through investing globally,” JLL said.
The report noted that Japan accounted for more than half of Asia’s $3.8 billion hotel transaction volumes during the first half of the year at $2.2 billion worth of transactions.
JLL noted that this was an 83 percent rise from Japan’s transaction volumes in the previous year.
“The US$604.7 million sale of the Grand Pacific Le Daiba Tokyo from Keikyu Corporation to Hulic Co., Ltd. marked the largest transaction within Asia Pacific in 2016 to date,” the report said.
In terms of buyer profiles, domestic buyers have accounted for most of the hotel investment transactions in Japan, with J-REITS accounting for nearly half of the sales activities in the first half of the year.
“However, the country is also catching the eye of mainland Chinese investors due to the recent influx of Chinese tourists, reflected in the Greenland Group’s move in early 2016 to acquire Candeo Hotels in Chiba in the Greater Tokyo area,” the report said.
Despite slowing economic growth in China, Chinese investors still display appetite for offshore hotel investments, JLL noted.
JLL said that China also witnessed increased level of investment activity during the first six months of the year, up by 118 percent to US$244.2 million.
“The recent uncertainties in the domestic market are leading to more owners evaluating the sale of their assets and transaction volumes are expected to rise in the future,” the report said.
Global investment declines
Global hotel investment volumes declined by 52 percent in the first six months of 2016 to $24 billion from the $49.9 billion recorded in the same period last year.
“There has been a shift in investor sentiment due to a mix of geopolitical and economic issues,” the report said.
Europe, the Middle East and Africa (EMEA) posted the biggest decline in the first half of the year at 64 percent to $7.1 billion from the $19.7 billion recorded in the same period last year.
Similarly, hotel investment volumes in the Americas dropped by 51 percent in the first six months of 2016 to $13.1 billion from $26.9 billion posted last year.
“Uncertainty surrounding the global economic and political environment such as the UK’s EU referendum, the upcoming U.S presidential election, terrorist attacks and stock market fluctuations has made hotel investors adopt more of a wait-and-see approach towards investment decisions as underwriting future income growth has become more difficult,” JLL said.