Experts believe there is renewed interest in hotel investments in the Asia-Pacific region in the wake of a tumultuous 2020.

The pandemic resulted in marked changes in consumer travel and experiences leading to a new wave of trends affecting hotel operations and strategy, they added. Vaccinations currently taking place have given fresh hope for travel, thus stimulating real-estate recovery in the hotel industry.

Nihat Ercan, senior managing director and head of investment sales, Asia-Pacific, at business advisory JLL Hotels & Hospitality, pointed to the JLL Global Investment Outlook Report 2021, which polled approximately 100 Asia investors over existing or potentially active interests.

“The general consensus that we have from investors is, essentially, the cycle has been reset. [Following] the global financial crisis, we had roughly about 12 years of growth,” he said.

Ercan said pricing hit an all-time high in 2019, driven by strong operational cash flow at the hotel level, and that priced private equity out of the market. The ‘reset’ has now created opportunities for acquisition at “more opportunistic levels of pricing with a view to an eventual exit in five to seven years.”

He added 2019 saw approximately $14 billion of sales around the region, which was the highest on record since 2007, and that transactions this year are expected to be approximately $7 billion, a 20% increase over 2020.

Seventy percent of respondents to the JLL survey indicated a strong interest in acquiring hotels in 2021.

Ercan said Asian hotel owners are generally not under pressure to sell.

Instead, they tend to look at how they can reinvest, renovate and refurnish to stay ahead of the recovery in line with changing consumer preferences and advancements in technology, he said.

The JW Marriott in Ho Chi Minh City, Vietnam, is one example that is being repositioned to contain more than 4,000 residential and “office-tel” offerings. It is slated to open in 2024 in what Marriott International describe as “the largest hotel-branded residential project announced to date worldwide.”

Another example is the sale of the Somerset Azabu East Tokyo in January to a domestic investor consortium in Japan for repurposing into a multifamily residential use.

There appear to be more buyers than there are sellers in the region.

The pandemic notwithstanding, several hotel growth opportunities have materialised in the last six months. Private equity is showing the greatest level of appetite, a reflection of the investment sentiments towards such opportunities. Japan, Southeast Asia and Australia are the top three regions attracting considerable interest, Ercan said.

In November 2020, Iris Capital, which has its regional HQ in Tokyo, acquired a 17-hotel portfolio across Sydney, Melbourne, Canberra and Brisbane from AccorInvest for more than $130million, while banking on post-COVID-19 hotel recovery, Hong Kong’s Alta Capital Real Estate launched a new fund in October 2020 targeting undervalued sustainable and wellness-oriented hospitality assets in such key markets as Indonesia, Japan, South Korea, Malaysia, Sri Lanka, Thailand and Vietnam with an eye to reposition, rebrand and redevelop those assets.

Another transaction, acquired after the onset of COVID-19, was borne out of a joint venture between two Singapore-based firms, Park Hotel Group and Apricot Capital, a diversified multi-asset private investment firm.

The two firms joined forces in rebranding the 112-room Park Hotel Kyoto in Kyoto, Japan, which was Park Hotel Group’s first foray in Japan following its acquisition of the Grand Park Otaru, Hokkaido, in 2008.

The Kyoto acquisition, which opened in March, was unique in that it was transacted via virtual inspections, a first for a hotel in Asia.

“We are confident in the potential of travel and tourism in Japan and its recovery post-pandemic. Kyoto as the cultural capital of Japan has always had extremely strong demand from the domestic and international markets, and the hotel is well positioned to ride on the recovery when travel resumes,” said Allen Law, CEO, Park Hotel Group.

Darren Teo, managing partner, Apricot Capital, said for his firm the joint venture was an opportunity to further diversify the company’s real estate portfolio through its maiden foray into the Japan hospitality industry.

“The strong fundamentals of Japan’s hospitality industry and the popularity of Kyoto as a destination of rich heritage significance made this hotel a compelling investment for our real estate portfolio,” he said.

Park Hotel Group also has formed a new venture called HotCap Asset Management with RB Capital, also based in Singapore.

Formed in mid-2020, its primary aim is investing in distressed and undervalued assets, Law said.

Tokyo-based investment manager PAG is eyeing distressed debt and property investments in Japan, China, Australia, South Korea and other selected markets through its Secured Capital Real Estate Partners VII fund, which has amassed $2.75 billion in investor funds.

Many Asian owners are well capitalized and thrive on very strong banking relationships, JLL’s Ercan said. They have a lot of diversified income streams, and hotel investments are seen as long-term ownership.

In popular resort destinations like Bali and Thailand, where the markets are closed, “the pressure may result in a more motivated pool of possible sellers but not necessarily distressed sale prices," he said

Prices hold firm for destinations with large pools of domestic travelers such as Australia, Japan, China and South Korea, which provide attractive opportunities for seekers of hotel investment.

Less dense resort markets, such as The Maldives, have remained open throughout the pandemic and are performing well.

“Pro-tourism type policies give real estate buyers confidence,” Ercan said.