According to Jones Lang LaSalle Hotels’ latest Hotel Investment Sentiment Survey, hotel trading expectations across Asia Pacific have reached an all time high. The survey, which targets the world’s 2,000 largest investors and owners of tourism properties, is the only global survey of its kind.
“Asia Pacific investors have shown a sharp upswing in short term trading sentiment since December 2001, and at present, it is at its most optimistic level since the inception of this survey,” said Mr David Gibson, CEO Jones Lang LaSalle Hotels. “Investors expect an improvement in trading conditions for all but three of the 25 major Asia Pacific markets,” he continued.
“The resoundingly positive sentiment is led by the major markets of China and India which continue to benefit from their robust economies. Stand out markets in the short term include Bangalore, Hong Kong, Shanghai, New Delhi, Mumbai, Beijing and Sydney. Over the medium term, Macao is expected to join this group of star performers,” said Mr Gibson.
In line with record high sentiment, average initial yield requirements across Asia Pacific have dropped to an all time low. The yield compression is also being driven by increased availability of debt and the low interest rate environment.
Across the 25 markets studied, investors require an average initial yield of 10.1%, down from 10.4% six months ago. “Not surprisingly, investors are most comfortable with the transparent gateway markets of Singapore, Tokyo and Sydney,” said Mr Gibson. “In these markets, the survey indicates yield requirements are between 7.8% and 8.3%. However, our transaction experience shows actual yields are generally lower,” he added.
“Given the record high optimism it is not surprising that most investors surveyed indicated they are predominantly interested in acquiring or holding hotels,” said Mr Gibson.
According to the survey, markets with an overriding buy sentiment include Beijing, Bali, Seoul and Tokyo. “In all but Seoul we expect to see some transaction activity during 2004,” said Mr Scott Hetherington, Managing Director, Jones Lang LaSalle Hotels, Asia. “Acquisition opportunities are now appearing in Beijing and we have recently witnessed two arms length transactions in Indonesia - both involving foreign investors,” said Mr Hetherington. “Although Tokyo is more illiquid than other markets in Japan, investment will be driven by ongoing restructuring of companies’ balance sheets and we expect to see the sale of assets by opportunity funds who acquired them in the late 1990s,” he added.
“Counter cyclical investors should examine markets currently located in or near the trough of the market cycle,” said Mr Gibson. “Our picks would be Melbourne and Bali, which offer strong fundamentals,” he added.