Transactions in Asia Pacific

Over the past twelve months from October 2016 to September 2017, HVS has noted close to 240 transactions across Asia Pacific worth approximately US$12 billion. In comparison to the same period the previous year, transaction volume in Asia Pacific has increased by almost 12% with China contributing to 40% of the hotel transaction volume in the region. The largest transaction recorded was the portfolio of over 75 properties under Dalian Wanda China.

Over the period from October 2016 to September 2017, Asia Pacific (excluding China and India) witnessed a total hotel transaction volume of almost US$4.4 billion as compared to approximately US$8.6 billion in the previous year. Reasons for slower transactional activity in the region include owners holding onto hospitality assets due to future growth potential, lack of capital strength from buyers, desire to hold onto ownership of marquee hospitality assets, amongst others.

Regional Share of Hotel Transaction Volume

We note that the majority of hotel transaction volume is still directed towards Australia, Japan and South Korea, similar to the previous period of October 2016 to September 2017.

As compared to the previous period, hotel transaction volumes in Indonesia, Malaysia and Thailand have seen strong positive growths while Australia, Cambodia, Maldives, South Korea and Singapore have remained fairly stable. Markets such as Japan, Myanmar, New Zealand, Philippines and Vietnam were found to be less active.

Investor Profile

With a share of approximately 24%, the “developer/owner” dominates the hotel transactions in Asia Pacific and the “real estate operating companies” follows closely after at 23.5%.

The majority of the investors who invest heavily within the Asia Pacific region are located in more developed countries such as Australia, Japan and Singapore.

Key Points

Tourism directly contributes 2.9% to GDP in 2016
2.6% Real GDP growth expected in 2017
7.6 million international tourist arrivals recorded in 2016

Highlights

Infrastructure Projects

• A$500 million expansion of Sydney Airport by 2020

New Hotel Openings in Sydney and Melbourne

2017
• Little Albion, 35 keys
• Felix Sydney Airport, 150 keys
• PARKROYAL Melbourne Docklands, 281 keys
• Sofitel Sydney Darling Harbour, 590 keys

2018-2020
• Luxury: 2 Hotels, 534 keys
• Upper Upscale: 11 Hotels, 1,739 keys
• Upscale: 7 Hotels, 1,425 keys
• Upper Midscale: 6 Hotels, 1,434 keys
• Midscale: 2 Hotels, 371 keys
• Independent: 7 Hotels, 1,297 keys

Notable Transactions

• 402-key W Sydney Hotel, slated to open in 2021, transacted at A$532 million (A$1.3m/key) in June 2016

Demand

In the first half of 2017, tourist arrivals displayed positive year-on-year (y-o-y) growth. Total arrivals of 4.2 million outperformed last year’s arrivals by 7% and China overtook New Zealand as the top source market with a 16% market share. Arrivals from China recorded an 8% y-o-y growth, significantly higher than the 1% y-o-y growth for arrivals from New Zealand. Domestic visitors continue to play a major role as they account for 57% of total room nights occupied in 2016.

Supply

HVS has noted that, going forward, there will be 140 additional hotels with approximately 26,000 keys in Australia by 2020, having 16 hotels opened in the first half of 2017.

Sydney and Melbourne Hotel Performance 2016 vs. 2017F

As of year-to-date (YTD) June 2017, hotel occupancy in Sydney increased by 1%, while occupancy in Melbourne decreased by a marginal 0.2%. Sydney’s room rates increased significantly by 5.5% y-o-y, while Melbourne’s room rates remained constant.

Transactions

Although total volume of investment activity across both cities has been increasing y-o-y from 2012 to 2016, investment activity has been relatively muted even till YTD September 2017 with two transactions recorded in Melbourne. Over the last five years, Singaporean investors accounts for the bulk of investment volume with a 28% share.