Pandemic to spur acquisitions in hospitality sector

·2 min read

INVESTORS’ long term outlook for hotel investment in the Philippines remains positive while the hospitality sector is expected to soon transition to a period of recovery.

According to global real estate services firm JLL, while the hospitality industry was one of the most heavily affected sectors in 2020, hotel operators are optimistic that the hospitality sector will soon rebound.

“Most hotel operators are trying to determine the best estimated return of airline traffic. Hotels definitely see tourism picking up as soon as flight restrictions are lifted—it is only a matter of timing, which is heavily dependent on the rollout of the Covid-19 vaccine. Local tourism and staycations are also being encouraged to push demand,” P. Ryan Isip, JLL Philippines’ head of capital markets, said.

In its 2021 Real Estate Market Overview webinar, JLL Philippines said hotel operators are constantly exploring ways to stay in business while mitigating high operational costs.

Many hotels are operating as quarantine facilities, which make them fare better than hotels that are not accepting bookings from high-risk individuals.

“We are already seeing opportunities in the market for opportunistic acquisitions. Several groups are already looking for this type of transaction, typically management contracts in core locations,” Isip said.

“All these considered, JLL Philippines remains optimistic about hotel investment in the country in the long term. Acquisitions during this period should be opportunistic, and investing while the hospitality sector is under pressure will yield good results in the long run,” he added.

In the Asia Pacific region, 70 percent of the investors surveyed by JLL said they are bullish on the Asia Pacific hotel market and are interested in deploying capital into the sector in 2021.

Forecast

JLL is forecasting approximately US$7 billion in transactions in 2021, an increase of 20 percent from $5.8 billion in 2020. While sizable pools of capital are ready to be deployed, pricing and financing will become a larger consideration for investors.

JLL, however, noted that the gap between buyer and seller price expectations will narrow as distress becomes less likely, while sellers come to terms with the impact of operating cash flow on pricing. Over 80 percent of investors surveyed are eyeing discounts of 20 to 30 percent, while sellers are expected to move roughly 10 percent in asking prices.

As optimism around recovery builds, Japan (52 percent) and Southeast Asia (46 percent) are emerging as the most desirable hotel investment markets in Asia Pacific, owing to strong demand dynamics and positive long-term fundamentals.

Investors also view Australia (31 percent) and China (22 percent) favorably. (JOB)