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November 16, 2017

Hotel investment deals are flowing into Hong Kong hotels with 11 deals worth nearly US$1.5 billion recorded this year to date.

After nearly two years of declining visitors numbers, arrivals started to pick up in late 2016 with the latest JLL research showing that overnight visitors to Hong Kong have grown by five percent year-on-year to 13.1 million in June 2017; in particular, the short haul market rose 7.9 percent year-on-year – signaling a sustained recovery in the tourism market.

Several new properties have been launched to meet demand, including Disney Explorers’ Lodge and flagship Kerry Hotel by Shangri-La. Others in the works include the much-lauded luxury hotels, Rosewood Hong Kong and The Murray.

“Hong Kong hotels appeal to investors because of the discounted rate per square foot when compared to other asset classes, something that has been a factor in some recent transactions,” explains Mike Batchelor, Head of Asia Hotels & Hospitality Investment Sales for JLL.

New tourist attractions such as Harbour City’s Ocean Deck and the upcoming additions to Hong Kong’s Disneyland will continue to lure visitors while the country’s tourism board is planning events and programmes to keep the city dynamic. Initiatives include the first E-Games Festival and the recently launched Great Outdoors campaign.

Aside from flourishing tourist numbers, demand for hotels has grown as investors look to redevelop assets into commercial blocks in the search for better returns given the strong demand for office space and the rent premium in Hong Kong.

So far, Crowne Plaza Hong Kong Causeway Bay and Hotel LKF in Central have been earmarked for redevelopment with Batchelor adding that the recent sale of J Plus Hotel likely points to a conversion of the former boutique property to an office block as well.

Tourist favourites
Outside of Hong Kong, tourist-favourites Thailand and Japan took second and third place in terms of hotel investment volume.
Hotel deals in Japan hit more than US$1.2 billion in 2017 and will continue to stay active with the 2020 Tokyo Olympics looming ahead, according to Batchelor.

“Domestic investors are traditionally the most active buyers in Japan’s hotel market although we are now witnessing international investors becoming increasingly active in Japan, as market fundamentals continue to improve and it remains one of the most attractive debt markets in the region. We expect a solid last quarter of 2017 in terms of investment activity.”

Thailand recorded US$335 million in hotel transactions in the first nine months of 2017, led by the capital, Bangkok. Overall, the Thai hotel market is likely to hit US$420 million by year end.

“Strong investor interest in Thai hotels counts for a lot when it comes to investment activity,” observes Karan Khanijou, from JLL’s Hotels and Hospitality Investment sales team. “Thailand’s tourism prospects continue to prosper with the number of international arrivals to the country hitting a new high of 32.5 million in 2016. We expect this to reach 35 million this year, supported by the country’s growing reputation as one of the world’s most popular holiday destinations, well-developed infrastructure and increased air connectivity.”

Thailand’s hotel market offers relatively more affordable investment opportunities and higher yield returns than many other more developed markets in Asia, Europe or the Americas. “Interest from both domestic and regional investors in Thia properties is expected to remain strong, buoyed by healthy trading performance and returns,” sums up Khanijou.

Click here to read more about hotel investment in Asia Pacific.

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Mike Batchelor

Managing Director - Investment Sales, Asia

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