Money, Money, Money: The Hunt for Asian Hotel Assets in 2021
Looks like the hospitality industry can be proud of the positive mindset its active participants are ready to exhibit. Despite the ongoing pressures of the COVID-19 pandemic, investors seem confident enough in the optimal long-term prospects of the Asia Pacific hotel market, signaling an increased amount of interest in assets in 2021. According to recent research carried out by JLL, approximately 70% of the current and potential investors expressed their desire to deploy capital in the sector this year. What is the drive behind their confidence and which markets specifically are they turning their eye to?
The most appropriate answer to the first question is perhaps the narrowing gap in expectations of buyers and sellers. As the consequences of the pandemic soak in, both the economy and the asset holders’ mindsets adjust to account for the inevitable losses in selling prices due to the impact of operating cash flow. This in turn leads to a better mutual understanding between those looking to buy and those wishing to sell hotels. As such, over 80% of investors surveyed are hoping for discounts of approximately 20-30%, while owners are still hesitant and ready to negotiate about 10% off the asking prices. While not exactly on par, these numbers are far more likely to ensure a compromise than the ones we saw last year when much less was known about the pandemic and its effects on both the hospitality sector and the economy in general.
As to the desirability of various markets, Japan seems to top the list with 52% of investors looking to deploy capital there, closely followed by the South-East Asia region (46%). Such a fierce interest is probably at least partially due to the strong demand dynamics and positive long-term fundamentals both of these markets have been exhibiting recently. Other regions generating much hype are Australia (31%) and China (22%), which has been viewed favorably by many thanks to an (arguably) effective response to the pandemic and ever-increasing demand – both domestic and international.
Some other general reasons for a positive outlook include the consumers’ obvious desire to travel once the restrictions are lifted and flight routes are reopened. According to Nihat Ercan, Senior Managing Director at JLL Hotels & Hospitality Group, there is a fair share of optimism around the deployment of vaccines and eventual recovery of the hospitality and tourism sector, which is why the investors are on the hunt, not willing to miss such a lucrative opportunity. Seems like the only thing left for us to do is hope that they are correct.