Jones Lang LaSalle Hotels reveals their top-recommended strategies for hotel investment in the Asia Pacific region in 2001.
“The Asian financial crisis and the subsequent economic recovery have created fresh investment opportunities in Asia Pacific`s hotel real estate markets that could generate significant risk-adjusted returns” said Mr Gibson, Managing Director, Jones Lang LaSalle Hotels.
This is reflected in the firm`s recommended investment strategies for the region, which include:
* Capitalise on individual asset purchase opportunities from chain consolidation. As a consequence of major portfolio activity, a number of non-strategic assets are likely to be disposed, providing opportunities for emerging brands to accelerate their growth, such as Pacific International and Carlton Hotels.
* Target under-performing hotels that can be re-badged. Due to the current competitiveness of markets in Australia, a number of owner/operator hotels are under-performing and could benefit from the introduction of chain affiliated management companies.
* Buy real estate backed debt in the absence of direct equity purchase opportunities. This is possible in markets such as Singapore and Japan, and has potential in markets such as Indonesia and Thailand.
* Maximise yield by leveraging in markets where costs of funds are still low and barriers to entry high, such as Singapore and Japan.
“In particular, strong buy markets are Sydney, Singapore and Phuket. These markets are characterised by limited supply growth, prompting a recovery in room rates, and high barriers to entry. They are also experiencing growth in tourism demand either due to currency depreciation or, in the case of Sydney, the Olympics” explained Mr Geordie Clark, Executive Vice President, Jones Lang LaSalle Hotels. “Markets to watch are those considered to be approaching or emerging from a perceived trough in the asset value cycle, offering the opportunity for investors to benefit from the up-side”.
For those investors looking to break out of their domestic market for the first time in 2001, Jones Lang LaSalle Hotels provides a top-down framework for global investment. According to Mr Gibson, the key investment criteria, apart from the old adage of location, are market fundamentals, capital structure, transparency, diversification, costs and the position in the cycle.
There are some positive trends emerging globally, which will collectively reward investors. “The majority of major hotel markets in Europe and North America are enjoying a healthy balance of demand over supply and in Asia, recovery is spreading from Singapore, Hong Kong and Korea to include other major markets” said Mr Gibson. “Opaque markets are becoming more transparent. Plus, the integration of technology into hotels is creating a number of opportunities for investors to exploit.”
The consolidation and globalisation of the hotel industry will continue to have wide-ranging implications for investment, as brands seek to create or maintain footholds in key strategic locations. Continuing globalisation will increase demand in those cities, like Sydney, that are gateways to the rest of the world.
The Global Framework presented by Jones Lang LaSalle Hotels enables investors to make informed decisions, while also putting each investment in a risk-return context. “Once investors have decided on investment goals and acceptable levels of risk, reviewing international investment opportunities becomes much less intimidating” concluded Mr Gibson.