HOTEL ASIA – PACIFIC: “WHILE KEY MARKETS REMAINED HOT, INVESTORS ADOPTED A CAUTIOUS ATTITUDE TO DEVELOPING MARKETS”
The second quarter of 2017 registered US$1.58 billion worth of investment transactions and a total of 29 hotel transactions across eight countries were tracked in Asia-Pacific. Collectively the transaction amount in the first half of 2017 recorded a YoY decrease of 5.5% compared to 1H/2016.Raymond Clement, Managing Director of Hotels, Savills Asia Pacific said, “After an encouraging start in 2017, the market slowed in the second quarter as investors focused more on home-ground investment opportunities. Nonetheless, given the performance of the regional markets, it may serve investors well to consider secondary markets for assets with high value-add potential.”One of the largest transactions this quarter was the sale of Four Seasons Bora Bora, acquired by a consortium led by Gaw Capital, from French developer Thierry Barbion and Lancaster Group. The sale was publicised in February this year and was finalised in the second quarter. Another noteworthy transaction was the InterContinental Sydney Double Bay, which was sold for approximately AU$140 million or US$105.3 million. Chinese company Shanghai United RE purchased the property from Singapore-based Royal Group. It is noted that despite the major offshore purchase of the French Polynesia asset, a majority of the transacted hotels were still located in the mature markets of Australia, Hong Kong and Japan, wooing domestic buyers with stable performing assets.Although the first half investment volume recorded a YoY decrease due to the softened expectations for the regional market, investors are still actively looking for stable investments to mitigate the growth outlook, especially in established markets. However, deals in these areas tend to have high prices and often limited yields. Julien Naouri, Director of Hotels, Savills Asia Pacific said, “Other Asia-Pacific markets remain opportunistic, but with potentially higher returns than the global average; here investors are taking a more strategic approach, choosing assets with higher value added potential.” Savills further outlook for the hotel sector: Chinese outbound investment has dropped following tighter regulation of capital outflows and these restrictions look likely to remain in place for the time being. In Japan, the Government has approved rules on limiting homesharing by private citizens to 180 days a year, which has legitimized the operation of short-term rental platforms such as Airbnb. Previously, these platforms have been operating in a legally grey area. Once legitimised, home-sharing rentals will absorb some of hotelstay demand and may place price pressure on hotels. In the main Asia-Pacific markets of Hong Kong, Australia, Japan and Singapore, some big-ticket deals are under negotiation, which will have a major impact on total annual transaction volume this year.
Southeast Asia and South AsiaWhile Singapore is always a key entry market for investors looking at the Southeast Asia region, deals are few and far between. In Q2/2017, two boutique hotels, The Naumi Liora and The Club Hotel, were sold for a total of SG$127.5 million or US$92.1 million by the Hind Group to 8M Real Estate. Though Singapore hotels often come with a higher price tag, stable market conditions and high occupancy rates provide investors with steady cash flow suitable for investors who are looking at more stable long-term holdings.Malaysia also saw two transactions outside the key investment cities of Kuala Lumpur and Johor Bahru. The Lone Pine hotel and The Summit Hotel Bukit Mertajam, both located in Penang, were sold for a total of MYR120 million or US$23.1 million to domestic buyers. Due to the weakness of the Malaysian Ringgit, real estate prices have fallen for oversea investors. However, investors are taking a very cautious approach when selecting the right assets for acquisition.The Malaysian hotel market may face some headwinds due to the implementation of a tourism tax from July 2017. All types of premises used as accommodation for tourists, such as registered hotels, will be taxed at rates starting from MYR2.50 per room per night at a nonrated accommodation to MYR20 per room per night for five-star accommodation.