The APAC lodging sector recorded strong growth momentum in 2016 and this has been sustained through 2017. In addition to continued appetite for key city hotels, investors have been expanding their focus to second-tier markets in search of higher yielding opportunities. Hotel sector initial yields were back to pre-GFC levels in 2016. Investors have displayed significant appetite for such opportunities in those markets with strong domestic and international visitation fundamentals, despite relatively sharp pricing. Australia has been active with a number of sizable transactions in Sydney and Melbourne. Given the low interest rate environment, sound economic growth outlook and the weaker AUD, transaction activity is expected to continue provided stock can be sourced. Hotel pricing is high in Japan reflecting strong investor demand, the nation’s zero interest rate policy and the likelihood of surging international arrivals in the lead-up to, and during, the 2020 Summer Olympics. In emerging markets – notably China – middle class expansion is allowing a domestic travel culture to develop and this benefits certain types of hotels. In the first half of 2017, given the lack of opportunities in APAC gateway cities, hotel investors searched harder, appearing to seek out emerging tourism markets where the long term fundamentals for arrivals growth are strong and the demand-supply balance is not heavily outweighed by new hotel supply.
Source : CBRE Global Investors