Asia continues to be the main growth region in the world in terms of hotel investment, panellists at the Arabian Hotel Investment Conference have maintained.Industry leaders looked at what Middle East investor need to know about investing outside of the region in a panel discussion entitled ‘Middle East Capital goes Global’. With a population exceeding three billion, the Asian region is tipped to present continued lucrative investment opportunities for the foreseeable future.
“We favour China and India as potentially broad and deep markets both in the luxury sector, and perhaps particularly in the budget sector. We’ve just launched our easyHotel concept in India, for example, and I think you can expect to see additional developments from us in the sub-continent and elsewhere in Asia,” said Richard Johnson, Managing Director Real Estate, Istithmar.
“Elsewhere in Asia the high end resort markets in Thailand are attractive. We have recently secured the first W in South East Asia in Koh Samui. This country deserves its status as one of the main global tourism destinations,” Johnson added.
Other markets Johnson believes show promise include Eastern Europe and South Africa. “The South African market will be positively impacted by the World Cup in 2010. This is one of the reasons that we were so excited to be able to invest in the V&A Waterfront in Cape Town,” he explained.
The market is witnessing the development of a number of large investment houses in the region, both Government- and privately-owned, which are making major investments around the world.
The liquidity that both high oil prices and the growing inherent wealth of the region have brought appears to be here to stay for a while, and many organisations are using that liquidity to create powerhouse businesses.
However, while Johnson and his fellow panellists see opportunity in Asia, caution is advised when considering capital investments, and hotel investors need to consider the same basic fundamentals that any investor must ask: does the investment ‘fit’ with my portfolio? Can I create extra value to ensure an acceptable level of return? And is the level of risk acceptable?
“At Istithmar, these are the questions we ask before taking a detailed look at any potential investment. Our real estate business unit turns down far more investments than we go for and the most common reason is simply an unacceptable level of risk,” Johnson said.
Istithmar is a major investment house based in the UAE focusing on private equity, real estate and strategic investments. Istithmar has a broad portfolio of companies in markets ranging from North America to Europe and Asia to the Middle East. Investment is focused on four industry verticals - consumer, financial services, industrial and real estate. To date, Istithmar has invested in over 30 companies with equity investment in excess of US $1.8 billion and approximate total enterprise value of $6 billion.
Hotel and leisure investments will remain a key growth area for Istithmar’s real estate portfolio, with Johnson predicting a continued upward swing.
“In the real estate sector, I think this keen interest in hotels and leisure investments will continue and may, selectively, accelerate. This is based on strong fundamentals, underlying growth rates within the travel and tourism market, and a range of largely under-exploited markets,” he said.
” Dubai is a great example of how you can create a world-beating travel and tourism industry out of almost nothing. Other countries are now starting to follow. All of this offers opportunity for the future.”
The Middle East Capital goes Global panel was moderated by Blair Hagkull, Managing Director, Jones Lang Lasalle MENA. Johnson was joined on the panel by Tim Hansing, Senior Vice President Acquisition and Development, Kingdom Hotel Investments; Paul Macpherson, Chief Development Officer, Jumeirah Group; and Rod Taylor, Head of Hotel Financing, Europe-Arab Bank.