Hotel investment sales in Asia pegged to hit US$3b by end-2013

REITs to dominate the industry.

According to Jones Lang Lasalle, over H2 2013, hotel transaction volumes are projected to record an additional USD1 billion in Asia, slightly above 2012 volume. This could result in 2013 total sales of between USD2.5 billion to USD3 billion. This forecast is based on properties currently in due diligence and those on the open market.

Jones Lang Lasalle, however, noted that the availability of investment grade assets in key cities (particularly in Singapore and Hong Kong where investor demand is highest) and the willingness of sellers to close deals through transparent processes in emerging markets will dictate the overall investment landscape.

"Investment will continue to be dominated by the aforementioned REITs, as well as Asian private investors, owner operators and private equity players," it said.

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As superannuation and other forms of capital continue to flow into trusts, their dominance in the market is likely to grow over time. Hospitality focussed REITs now exist in several Asian markets and are permitted to invest offshore.

The passing of REIT law in Thailand which allows overseas investment will provide further impetus for future buying activity.

Whilst not only targeting cornerstone assets, investors will look closely at the emerging hotel markets in a bid to acquire yield accretive investments because of the improving levels of transparency and good demand-supply fundamentals. 

Corporates, high net-worth investors and hotel operators have each accounted for the majority of sales activity in recent years with REITs taking an increasing share over the past 12 months.

As opportunistic investors, these buyers target markets which represent value or where stronger growth in fundamentals are forecast. Medium term RevPAR growth will continue to see these investor groups eagerly contesting hotel assets.