Yields Fall for Asia Pacific Hotels

Hotel trading expectations across Asia Pacific are the most positive since September 2000 according to Jones Lang LaSalle Hotels` latest Hotel Investment Sentiment Survey. 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 resoundingly positive,” said David Gibson, CEO Jones Lang LaSalle Hotels. “Expectations for Asia Pacific where the influence and potential of China has the most impact, are even more positive than sentiment in Europe and the Americas,” said Mr Gibson.
“Most markets are showing signs of economic and tourism recovery after a challenging year. Investors looking for income returns should seek assets in markets such as Sydney, Shanghai, Beijing and Brisbane, which are particularly expected to experience improved trading conditions, said Mr Gibson.

“In Australia, Sydney and Brisbane are set to benefit from stable supply, an expected rebound in international arrivals and in Brisbane`s case, strong domestic corporate and leisure demand,” continued Mr Gibson, “while investors clearly believe Beijing and Shanghai`s recovery from the impact of SARS will be swift and strong.”


For all markets except Manila and Jakarta, trading conditions are expected to be positive over the next two years. Shanghai and Sydney are expected to lead the way, followed by Beijing, Phuket and Brisbane.


At the beginning of the year, the Asia Pacific markets were spread evenly between the early downturn and the late upturn of the market cycle. Now the majority of markets are centred on the early upturn phase.

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“Counter cyclical investors should examine opportunities in Bali, Singapore and Tokyo, which are currently positioned on the trough of the cycle,” said Mr Gibson.


Brisbane is a market of note, currently the closest to its performance peak. “Given the minimal supply additions and the continued strength of the local economy, Brisbane looks set to enjoy further growth over the medium term before it peaks,” said Mr Gibson.

In light of the most positive short term outlook for the region since December 2000, investors have lowered their return expectations to the lowest yields on record. Across the 20 markets studied, investors require an average initial yield of 10.4%. “Continued low interest rates as well as the expected market upturn are driving this yield compression,” said Mr Gibson.


Indicative of strong investor interest and expected trading recovery, yields for Beijing, Shanghai and Hong Kong are expected to fall over the next six months. “These markets potentially offer opportunities to investors seeking capital appreciation. Beijing and Shanghai have witnessed sharp yield contractions since the last survey, highlighting investors` keen interest in the potential of the Chinese markets, despite profit repatriation concerns and transaction difficulties,” said Mr Gibson.

Investors` intentions to purchase hotel assets have increased significantly over the past two years, confirming their optimism for the industry. However, the primary intention of investors across the region is to hold their assets and ride the expected upturn in most markets.


Phuket is the most sought after market in Asia Pacific. “Investors appreciate the access, marketing, physical appeal and performance of the market, as well as the economic and tourism growth of Thailand,” said Mr Gibson. This is evidenced by the recent spate of investment activity in Bangkok, Phuket and Pattaya.


Investors are also strongly interested in tapping into the potential of Beijing and Seoul. “However, few arms lengths transactions are likely in China and there is dearth of quality stock in Korea,” said Mr Gibson.


Although relatively few investors intend to build new hotels across the region as a whole, this strategy is of interest to investors in the larger markets of Shanghai and Tokyo where prime sites are still available. Given its poor performance and instability, Manila is the only market where investors have a sell sentiment.


Jones Lang LaSalle Hotels, the world`s leading hotel investment services group, provides clients with value-added investment opportunities and advice. In 2002, its success story includes the sale of 6,747 hotel rooms to the value of US$862 million in 36 cities and advisory expertise on 116,877 rooms to the value of US$17.8 billion across 170 cities. Jones Lang LaSalle Hotels` services include transactions, mergers and acquisitions, financial advice and capital raising, valuation and appraisal, asset management, strategic planning, operator assessment and selection and industry research. Jones Lang LaSalle (NYSE: JLL) is the world`s leading real estate services and investment management firm, operating across more than 100 key markets on five continents.


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