Hotel investment market tops $1.5b in 2006

The Singapore hotel investment market set an all-time record high in 2006 with seven hotel-related transactions topping $1.5 billion.

Jones Lang LaSalle (JLL) Hotels’ managing director (Asia) Scott Hetherington said: ‘Singapore is undoubtedly one of the hottest hotel investment markets in Asia-Pacific last year. The upturn in hotel trading performance has simultaneously attracted intense interest in Singapore hotel assets and enticed some hotel owners to capitalise on the aggressive investor market.’

A JLL Hotels report reveals that for the Asia-Pacific, total transaction volume in 2006 was around US$5.25 billion. JLL Hotels is projecting hotel investments to exceed US$7 billion this year.

In Singapore, JLL Hotels’ senior vice-president (investment sales) Tom Oakden says it brokered three deals here - InterContinental Hotel Singapore, Grand Plaza Parkroyal, and a third deal which it could not disclose.

The seven hotel-related transactions here last year topped $1.5 billion, setting an all-time record high.

Mr Oakden also said that JLL Hotels is currently brokering another hotel transaction here. Interestingly, he added that hotel investment sales are not likely to top 2006’s as most of the ‘trophy assets’ have already been acquired. Owners of other hotels here were also not prepared to sell, he added.

JLL Hotels executive vice-president (Singapore) Chee Hok Yean noted that hotel property values had increased an average 10 per cent between 2005 and 2006 and pointed out that certain properties increased by as much as 30 per cent.

Ms Chee added that operating margins have also been improving, hitting 30 per cent in 2006 compared with the 15 per cent low in 2003. For 2007, JLL Hotels also expects average daily rates (ADR) to increase by 10-15 per cent for five-star hotels.

Capital inflows in Asia-Pacific have increased but yields have consequently been compressed. For Singapore, it said hotel yields are between 5-6 per cent.

‘We expect to see more transactions in more markets throughout 2007 as investor interest spreads into new markets, especially China, India, Vietnam and Thailand, although Singapore, Hong Kong and Tokyo are expected to remain investment hotspots in 2007,’ added Mr Hetherington.

Source: The Business Times, 07 February 2007