Investors flock to hotels amid tourism rebound

Hotel investment in Asia Pacific is rising on the back of a strong tourism rebound.

Investment volumes in the first half of the year hit $5.7 billion, up 19% from the year earlier, according to JLL data.

This follows an uptick in tourism. International visitor arrivals in Asia Pacific are projected to reach a new high of 741 million this year, surpassing pre-pandemic levels for the first time, data from the Pacific Asia Travel Association (PATA) shows.

“With tourism thriving once again, investors are pouring back into the region, fuelling a surge in hotel investment volumes,” says Nihat Ercan, CEO, APAC, JLL Hotels & Hospitality Group. “This sets the stage for a robust hotel market in the years to come.”

Japan emerged as the region's hottest hotels market in the second quarter, capturing over half of all transactions, JLL data shows. A notable deal in April saw American private equity giant KKR acquire a 14-hotel portfolio from Japanese developer Unizo Holdings.

In May, Japan welcomed more than three million visitors for the third straight month, marking a 60% increase compared to the previous year.

But it’s not just tourism attracting investors to Japan. A weaker yen and cheaper debt financing, compared to other global markets, make it a prime target for cross-border investors seeking attractive returns, according to Ercan.

“Japan offers investors the opportunity to achieve positive carry, as property yields exceed borrowing costs,” says Ercan. “This is a rare find globally and makes Japan a compelling investment market.”

Thailand and China are also attracting strong investor interest. Together with Japan, the three countries accounted for 88% of all APAC hotel transactions in the second quarter.

Not surprisingly, official Thai data indicates the country welcomed over 17.5 million visitors in the first half of 2024, up 35% year-on-year. This is sparking deals, such as the recent sale of The Lamai Samui Resort & Spa Koh Samui and Dhara Dhevi Chiang Mai for $64 million.

However, in China, the uptick in hotel deal activity has been mainly driven by domestic investors.

“Foreclosure sales have led to higher transaction volumes in both major and secondary cities,” notes Ercan. “The swift recovery of domestic hotel trading performance is also attracting the interest of non-institutional hotel investors, potentially expanding the buyer pool.”

With inbound travel to APAC on a continuous upswing, hotel deal activity in the region is expected to pick up in the second half of 2024 and reach $11.6 billion for the full year, according to JLL estimates.

Ercan believes Japan, China, and South Korea will remain top markets for hotel transactions in the region.

“Japan and Korea remain tourism powerhouses, driving strong hotel performance and stimulating investor appetite,” says Ercan. “This is particularly true for Japan where favourable market conditions persist.”

Beyond the established leaders, emerging markets like India, Indonesia, and Thailand, are now poised for record growth as investors set sights on capitalising on the tourism resurgence.

“India's tourism boom, marked by the increase in tourist arrivals and improved hotel performance, has sparked renewed interest among hotel operators and investors in India since mid-2023,” says Ercan.

“Meanwhile, weaker currencies in Indonesia and Thailand, along with easier visa access, are expected to spur tourism and hotel performance, further drawing investors to these markets.”