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Investment case for hotel assets in Asia Pacific proves favourable 

IPD analysis shows positive risk adjusted returns for hotel assets in Asia Pacific


SINGAPORE, 10 July 2013 – Asia Pacific hotel property assets are not the high risk investment they’re often played out to be, according to IPD’s latest Asia Pacific Hotel Investment Index, which is sponsored by Jones Lang LaSalle and Ryan Lawyers.

Based on quarterly observations of annual volatility over seven years, IPD data shows that hotel assets have delivered a relative outperformance in return, with a risk profile residing between the retail and office sectors (Fig 1). This suggests that hotels compete favourably on a risk adjusted return basis when compared against core property sectors and are actually less volatile than often perceived.

Speaking at a recent industry event, IPD unveiled that the Asia Pacific hotel property market recorded an annualised total return of 11.1 percent for the year ending December 2012 (Fig 2). This result consisted of a strong 6.7 percent income return and a 4.1 percent capital return.

In 2012, total annualised returns in Asia were marginally higher at 12.2 percent than in Australia (9.5 percent).  Hong Kong was the top performer, delivering an annualised total return of 23 percent to December 2012, largely driven by capital growth. 

“Whilst trading performance in key markets entered a period of consolidation after recent growth years, 2013 has witnessed much greater deal volumes, providing real evidence of investor demand. In fact, hotel transaction volumes in Asia have grown 85 percent in the first half of 2013, with a further USD 1.1 billion in the due diligence pipeline,” said Ed Fitch, Executive Vice President, Jones Lang LaSalle’s Hotels and Hospitality Group.

“In common with other sectors, investor demand remains very strong in Asia whilst the search for yield continues. We are seeing strong prices being paid and cap rates have arguably compressed, so we expect hotel returns to be supported by capital growth this year,” Ed adds.

Dr Anthony De Francesco, Executive Director of IPD Australia and New Zealand said “I’m pleased that the development of the IPD Asia Pacific Hotel Index has increased the awareness and transparency of the investment return profile for hotels in the region. Clearly, the index illustrates that returns compete favourably against other core property sectors.” 

Tony Ryan, Principal, Ryan Lawyers said, "The IPD Asia Pacific Hotel Index provides valuable comparisons between the performance of hotels as against other industry sectors. On the basis of total return, Asian hotels were less affected by the global financial crisis than the office sector and rebounded more quickly. Further, over the last seven years, Asian hotels have shown a higher total return (both income and capital) and less volatility than the office sector. "

 

– ends –
 
Notes to editors 
 
    Fig 1: Risk-reward trade-off for property (Quarterly observations on a 7 year period ending Dec 2012)
fIG 1.jpg
        
 Fig 2: Return performance for Asia Pacific hotels
  fIG 2.jpg 
 
About the IPD Asia-Pacific Hotel Investment Index
The IPD Asia-Pacific Hotel Investment Index, sponsored by Jones Lang LaSalle and Ryan Lawyers, tracks the return performance of hotel property assets in the Asia Pacific region. The index is comprised of 179 hotels over 10 countries and has a value of approximately US$12.5 billion (as at December 2012).
 
About Jones Lang LaSalle’s Hotels & Hospitality Group 
Jones Lang LaSalle’s Hotels & Hospitality Group serves as the hospitality industry’s global leader in real estate services for luxury, upscale, select service and budget hotels; timeshare and fractional ownership properties; convention centers; mixed-use developments and other hospitality properties. The firm’s more than 265 dedicated hotel and hospitality experts partner with investors and owner/operators around the globe to support and shape investment strategies that deliver maximum value throughout the entire lifecycle of an asset. In the last five years, the team completed more transactions than any other hotels and hospitality real estate advisor in the world totaling nearly US$25 billion, while also completing approximately 4,000 advisory, valuation and asset management assignments. The group’s hotels and hospitality specialists provide independent and expert advice to clients, backed by industry-leading research.
For more news, videos and research from Jones Lang LaSalle’s Hotels & Hospitality Group, please visit: www.jll.com/hospitality or download the Hotels & Hospitality Group’s app from the App Store.
 
About IPD
IPD provides real estate benchmarking and portfolio analysis services to clients in over 30 countries around the world. These services incorporate more than 1,500 funds containing nearly 70,000 assets, with a total capital value of over USD 1.4 trillion. Each year, IPD produces more than 120 indices helping real estate market transparency and performance comparisons, as well as nearly 600 benchmarks for client portfolios. IPD is a subsidiary of MSCI Inc., a leading provider of investment decision support tools to investors globally, and clients include real estate investors, managers, consultants, lenders and occupiers. For further information on IPD, please visit www.ipd.com.

About Ryan Lawyers
Ryan Lawyers is a specialist firm servicing the real estate, hotels, tourism and construction industries. In the Asia Pacific region, Ryan Lawyers are the “lawyers of choice” for a number of the world’s leading companies in these industries.  With fully staffed offices in Singapore and Sydney and with an established network of local counsel we are able to service our client’s needs across Asia Pacific. More than just lawyers, the firm is a gateway to deals, finance and business opportunities. Ryan Lawyers are recognised for innovation and ability to adapt to the different business cultures of our clients and the countries in which they operate – including the many cultures of the Asia Pacific region, North America, Europe and the Middle East.
               
For more news, about Ryan Lawyers, please visit www.ryanlaw.sg or www.ryanlaw.com.au
 

About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet. Its investment management business, LaSalle Investment Management, has $47.0 billion of real estate assets under management.

Jones Lang LaSalle has over 50 years of experience in Asia Pacific, with over 25,100 employees operating in 78 offices in 14 countries across the region. The firm was named ‘Best Property Consultancy’ in nine Asia Pacific countries at the International Property Awards Asia Pacific 2012, in association with HSBC, and was named the number one real estate advisory firm in Asia Pacific in the Euromoney Real Estate Awards 2012. www.ap.joneslanglasalle.com 
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