Despite the short-term uncertainties, the fundamentals driving demand for tourism and hospitality in Asia-Pacific are set to see a resurgence.
Growing interest in hospitality assets as the region waits for the return of international tourists
The hospitality industry has been among the hardest hit sectors over the past two years as global mobility has all but ground to a halt. Sporadic lockdowns combined with extensive travel restrictions have forced many hotels to close temporarily or operate at a fraction of their pre-pandemic levels. As a result, Asia Pacific hotel occupancy hit a record low in 2020, ranging from 25% to 40% across most major regional destinations. Fortunately, amid rising vaccination levels and lower mortality rates, many countries have begun to cautiously reopen borders since the second half of 2021, and we have seen a pick-up in market sentiment and investment activity as a result.
Asia Pacific hotel investment volumes reached US$14.9 billion over 459 deals in 2021, surpassing the pre-pandemic five-year average of US$14.6 billion. The market saw an uptick in both investment volumes and the number of transactions in 2021, up 42.1% YoY and 25.8% YoY respectively. While the market has yet to see a flood of distressed deals, we have noticed a growing number of corporates shedding non-core assets for capital. Two Japanese groups, Kintetsu Group and Seibu Group, have reportedly offloaded their hotel portfolios to foreign funds for US$500 million and US$1.2 billion respectively over the past year.