Asia Pacific hotel sales set to reach close to US$4 billion in 2005

Asia-Pacific

According to Jones Lang LaSalle Hotels, hotel investment activity in Asia Pacific will reach close to US$4 billion by the end of 2005…

According to Jones Lang LaSalle Hotels, hotel investment activity in Asia Pacific will reach close to US$4 billion by the end of 2005, exceeding record levels achieved in 2004. In Asia, investment funds have continued to dominate hotel investment activity. Almost 75% of hotel transactions in 2005 to date have involved large investment funds, particularly US Opportunity Funds in Japan and South East Asia.

Mr Scott Hetherington, Managing Director Asia, Jones Lang LaSalle Hotels, commented: Recently, the largest single investment by a fund in the region was the acquisition of the company Raffles Holdings for US$1.01billion to Colony Capital. The sale of the Singaporean listed hotel company included 40 hotels in 33 destinations worldwide.

Strong interest in the hotel sector and a weight of capital looking to invest in the region has forced some downward pressure on yields throughout 2005. With the hotel investment market in Asia gaining momentum, we witnessed several key hotel transactions including the sale of the Sofitel Silom Bangkok and the Crown Hotel at Orchard in Singapore, said Mr Hetherington.

Whilst hotel investment activity has been prevalent across most of Asia, the majority of transactions have occurred in Japan. This activity is partly being stimulated by lower returns currently being achieved in office and residential asset classes, said Mr Tom Sawayanagi, Executive Vice President, Jones Lang LaSalle Hotels. He added, In 2005, we have witnessed the emergence of a number of Japanese funds including Simplex, Ken Corporation and Asset Managers, placing increased pressure on US Opportunity Funds for price.

Other key drivers of current investment activity is a result of a competitive debt and equity environment, continued confidence in local economies and the fact that hotels are increasingly being recognised as a viable investment asset class. We expect to see a number of company`s continue to divest non-core hotel assets from their balance sheets, however, typically demand for quality hotel assets far outweighs the availability of stock, said Mr Hetherington.

Bolstered by continued strong levels of international arrivals, robust RevPAR growth in Singapore, Bangkok, Hong Kong, Beijing and Shanghai during the first six months of 2005 is expected to boost investor confidence. We are also starting to witness more hotel development activity in these regions, said Mr Hetherington. He added, This will be largely limited to mixed use developments to ensure project feasibility.

Growth potential in China remains the topic of discussion. In China, some transactions are occurring but the process is slow in comparison to other countries around Asia, said Mr Hetherington. Commitment by the Chinese Government to develop and support the tourism industry will underpin ongoing investment activity.

Looking forward to 2006, hotel investment activity in Asia is likely to remain strong. Increasingly, investors are seeking out hotel assets in Phuket, Hong Kong and Singapore, said Mr Hetherington. In Hong Kong, the recent opening of Disneyland will help boost hotel trading performance, whereas in Singapore, the government is bolstering the tourism industry by planning for the development of two integrated resorts with a casino component.

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