Buoyant hotel investment activity is driven by investment-grade assets and strong demand from investors
According to JLL, hotel investment activity in Thailand is expected to reach THB12 billion (USD357 million) by the end of 2021, which is five times the growth seen last year.
So far, 13 properties valuing THB5 billion have been sold, compared to the four properties worth THB1.9 billion sold last year.
JLL’s data tracks sale transactions of investment-grade hotels, resorts, and serviced apartments in Bangkok and Thailand’s key leisure markets.
Chakkrit Chakrabandhu Na Ayudhya, executive vice president of investment sales at JLL Hotels & Hospitality Group Asia, says “Hotel investment activity in Thailand has recovered to the pre-COVID-19 level. We anticipate the total investment volume this year to reach THB12 billion, if ongoing deals with THB7 billion of combined value are completed by year-end as expected. This means the total investment volume for 2021 could surpass the 10-year average of THB10 billion per annum witnessed between 2009 and 2019.”
He continues, “At JLL, we have recently closed the sale of 138-key Citadines Sukhumvit 23 Bangkok and are working on more than 10 hotel deals with a combined value of over THB 17 billion. Of these, two are likely to be concluded by the end of this year.”
Resilience in hotel investment activity this year has been driven by many factors, which include strong demand from investors, availability of investment-grade assets for sale, and the narrowing gap between buyers’ and sellers’ price expectations.
“As the pandemic prolongs, more hotel owners including property developers and hotel operators decided to dispose one or two assets in their portfolio in order to improve liquidity. These sellers have also shown more flexibility in pricing. On the other end, buyers have adopted a more realistic approach on price expectation, realising that light at the end of the tunnel is starting to show and discounts vary from asset to asset,” said Pimpanga Yomchinda, vice president of investment sales at JLL’s Hotels & Hospitality Group Asia.
JLL’s observations indicate that luxury and iconic hotel assets offer little or no discount due to owners’ profiles and irreplaceable nature. The pandemic also didn’t impact these owners as much as others.
Moreover, prices of investment-grade assets in Bangkok have remained relatively firm, compared to resort markets, and bigger discounts are witnessed in second-tier markets.
Local high net worth families, well-capitalised corporates, and international private equity funds make up 90 percent of the number of transactions completed so far this year, as they look to establish or expand their hotel portfolio.
By transaction value, foreign investors this year are expected to account for 62 percent of the hotel buyers in Thailand when considering the remaining hotel deals that are likely to be closed by year-end.
Yomchinda adds, “By transaction value, Thailand’s hotel investment has witnessed a remarkable increase in foreign participation this year, particularly when compared to the past 10 years that saw foreign participation account for 37% per annum on average.”
JLL anticipates not only continued interest from foreign investors in the next few years but also higher competition for quality assets after cross-border travelling further resumes in 2022.
“With a number of larger deals in the pipeline and investor confidence in the long-term outlook for Thailand’s tourism and hotel industry, it is quite realistic to expect hotel investment volume in 2022 to make a post-COVID-19 new high,” Yomchinda concludes.
The Property Report editors wrote this article. For more information, email: [email protected].
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