SINGAPORE, 8 July 2021: Asia Pacific hotel investment
remained flat in the first half of 2021 with USD3.7 billion in sales, a decline
of 3.7% year-on-year. In total, 61 hotel investment deals were transacted in
the first half of the year across nine countries and representing over 10,000
rooms.

According to investment data tracked and analyzed by JLL,
hotel transaction volumes in the first half of 2021 stand approximately 18%
below the same period in 2019, which was the peak of the investment market in
the Asia Pacific. However, the completion of several major transactions
continues to demonstrate the resilience of the sector and the growing
confidence of investors in the hospitality market despite the current
challenging operating environment and travel restrictions.

“Confidence in the Asia Pacific hospitality sector’s
recovery remains high, and investor sentiment continues to view the industry
through a longer-term lens. Volumes have held up well within the backdrop of
government lockdowns and travel curbs, with the hotel sector’s resilience
remaining an evergreen theme throughout the pandemic,” says Mike
Batchelor, CEO, Asia Pacific JLL Hotels & Hospitality Group.

Investment in the Asia region totalled USD3.53 billion,
accounting for approximately 94% of the overall volume. China, Japan and South
Korea represented the three most active markets in the Asia Pacific,
collectively accounting for 86% of sales.

China led regional deal volume at USD1.3 billion of
transactions, up 54% year-on-year, with conversions of serviced apartments for
strata sale and sale of older hotels for conversion to alternative use a key
theme. Traditionally the region’s most active market, Japan had a slower start
to the year with volumes down 47% to USD1.1 billion; however, major sales by
Japanese corporates that are underway or planned for the second half of the
year will boost transaction volumes.

Activity in Australia also rebounded strongly in the first
half of 2021, driven by the closing of AccorInvest Portfolio for circa USD134
million, advised by JLL. The overall volume of USD215 million in deals closed
represented a 312% year-on-year increase in investments with scalable and core
opportunities continuing to attract strong investor interest and in turn,
holding up pricing.

Additionally, a two-tier market is at play across the region
and, other than a handful of gateway markets where buyer demand is holding up
pricing, due to the ongoing impact of the Covid-19 pandemic on global travel
and hospitality, investors continue to adjust their risk expectations across
most markets and are largely targeting opportunistic value-add plays, according
to JLL.

“In our interactions, it is clear there remains a gap in
pricing across most of the key markets. However, for the most part, the region’s
hotel owners are not under any stress owing to relatively low gearing, strong
lender relationships and, depending on the jurisdiction, broader government
support,” says JLL Hotels & Hospitality Group senior managing director,
head of investment sales, Asia Pacific, Nihat Ercan.

Longer-term confidence in the sector remains high as buyers
remain on the hunt for opportunities across the region. Record amounts of
capital are being raised for investment into the real estate sector. With an
assortment of buyers from private equity players to high net worth investors
and corporates are vying for positions on sales. According to JLL analysis,
Australia and Japan top the list for offshore capital, while domestic investor
demand is driving activity in China and South Korea. Additionally, leisure
markets are seeing a resurgence of investor interest on the back of
expectations for an expedited recovery in view of the pent-up leisure demand.

While investors remain wary of some of the shorter-term
challenges facing the Asia Pacific hotel industry, highlighted by delays in
vaccine rollouts and the impact of new strains and outbreaks, JLL’s full-year
outlook points to increased investment activity in the second half.

“We anticipate a sharper business cycle rebound, which will
drive hotel investment momentum across the Asia Pacific region. The strong
finish to the second half of the year will likely be driven by a pipeline of
major sales that have exchanged and which are due for completion in Australia,
Thailand, Japan and China. With this backdrop, our full-year forecast for the
region remains in line with our forecast of USD7 billion at the start of 2021,
representing an approximately 20% increase in year-on-year transaction volume,”
says Ercan.