Asia-Pacific hotels a ‘most compelling’ investment amid travel growth, flat supply: CBRE

Investor interest in hotel assets surged in Hong Kong and the Asia-Pacific region during the first half of the year, driven by increased consumer enthusiasm for travel and limited property supply, according to CBRE. The region welcomed $8 billion in investments, a 21% rise from the previous year, with Japan, mainland China, and South Korea leading the way, the consultancy revealed in a report on Thursday.

"Hotels have become one of the most compelling real estate investment sectors in Asia-Pacific," stated Steve Carroll, head of hotels and hospitality for Asia-Pacific at CBRE. "Strong travel demand and limited new supply are supporting both operating performance and asset values."

CBRE predicts that passenger traffic in the region will grow 5.1% this year, slightly lower than the 7.3% projection before the recent US-Israel war on Iran in February. Nevertheless, Asia-Pacific is poised to be the second-best performing region behind Africa's 10% increase, as highlighted in the CBRE report. Despite travel disruptions caused by the conflict, markets like Vietnam and Japan have continued to attract visitors from Europe and the Americas, compensating for a decline in arrivals from mainland China.

The report indicates that new hotel construction in Asia-Pacific will remain mostly flat, with a projected compounded annual growth rate of 2.3% between 2025 and 2029, falling short of the historical average of 5.1%. China will contribute 49% of the new hotel supply, the report adds. In Hong Kong, hotel occupancy remains below pre-pandemic levels, but rose by 3% year-on-year as of July, thanks to some upper-midscale hotels being converted to student accommodation, easing the pressure.

Hong Kong saw $8.2 billion (US$1.04 billion) worth of hotel property deals worth about 2,550 rooms so far this year, according to Colliers. Most of these transactions were for student accommodation conversions. "New hotel development remains challenging across much of Asia-Pacific due to elevated construction and financing costs," remarked Ada Choi, head of research for Asia-Pacific at CBRE.

"As a result, investors are looking to unlock value through repositioning and conversion strategies rather than ground-up development. With new supply expected to remain limited in many markets, existing hotel assets are well positioned to benefit from sustained demand growth and improving operating performance."