Transaction volume in Asia Pacific hotel investment down 18% to $7.5b

Australia had an extraordinary year, though.

Asia Pacific’s hotel investment market recorded an impressive $9.2 billion worth of transactions back in 2013, led by the resurgence of Japan and big-ticket trophy deals in Singapore and Shanghai.

According to a report from JLL, however, 2014 witnessed a moderation in sales activity across the region, falling by 18% to just above $7.5 billion with over 34,000 keys traded at an average rate of $221,000 per key. This was largely the result of reduced sales volume in Asia, falling by $2.8 billion from 2013.

In stark contrast to Asia, 2014 proved to be an extraordinary year for Australia. Transactions volumes reached a record $2.2 billion (up 86% y-o-y). Activity in Asia was dominated by Japan ($2.3 billion), Mainland China ($1.4 billion), Thailand ($338 million) and Malaysia ($292 million).

This overall decline in investment activity in Asia partly reflected a geographic shift of investment focus to recovering and emerging markets (such as the Americas and Western Europe) by Asian capital, rather than a diminishing interest in local hospitality assets.

The lack of investment opportunities in Asia compared to 2013 was also a key factor in reduced volumes last year. Total transaction volume in Asia Pacific totalled $3.7 billion in H2 2014, a 34% decline on the same period in 2013.

Here's more from JLL:

Whilst total investment volume was down, cross-border capital for hotel assets recorded in 2014 reached $4.8 billion, outpacing the $3.9 billion of inter-market investment over 2013. Australia once again remained firmly on the radar of Mainland Chinese investors.

However the growing interest in the USA and Europe was also evident with a fl ood of outbound capital chasing assets in several international gateway cities including New York, London and Paris.

Across Asia Pacific, the average price per key in 2014 was down 26% (y-o-y) despite Australasia alone increasing to $292,000 (up 24%). Asia registered $201,000 per key (down 35% y-o-y and reflective of the lack of large-scale transactions compared to previous years).

This was the lowest rate per key in over 10 years. The record sale of the Sheraton on the Park in Sydney to new Chinese heavyweight investor Sunshine Insurance Group is indicative of the high-profile acquisitions now occurring. Selling for $398 million, the transaction was a new record for a single-asset hotel sale in Australasia.

During H2 2014, Asia Pacific investment activity was dominated by Australia ($1.6 billion) and Japan ($1.2 billion). Arm’s length transactions in Mainland China amounted to just $250 million, further highlighting that Chinese investors prefer to purchase abroad on stronger trading fundamentals.