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The Savills Blog

The impact of Covid-19 on the APAC hotel investment market

Raymond Clement, Managing Director at Savills Hotels Investment & Advisory Services gives The Yield an overview of the APAC hotel investment market, and where the opportunities are to be found in SEA.

How the is APAC hotel investment market being affected by COVID-19?

APAC hotel investment market has experienced a record transactional year in 2019. Then COVID-19 hit, causing Q1 investment volumes to decline by 43% compared to the same period last year. The hotel market has been negatively affected by the pandemic, perhaps much more than other industries. With travel bans and cancelled events, hotel occupancy across all destinations has experienced a significant drop.

Both owners and investors are being more cautious despite continuing low-interest-rate environment. Although many investors with long-term vision are actively exploring different opportunities, some are adopting a wait-and-see approach and keeping their powder dry. We definitely anticipate a drop in hotel investment activity in the region this year.

Where do you see the opportunities in Southeast Asia (SEA)? Are there any distressed opportunities?

Over last five years, SEA tourism industry has experienced a boom resulting in many international hotel funds, private equity funds as well as High Net-Worth Individuals (HNWI) looking to gain exposure to popular tourist destinations. Prior to COVID-19, we were actively engaged with asset owners, running formal marketing campaigns as well as selling assets off-market. A few deals are being held off due to the current unfavorable market conditions.

There is a significant amount of interest in distressed assets in city-state location such as Singapore. We do not expect to see distressed assets, but rather “priced-to-market” opportunities in such prime urban locations. Most hotel owners in these markets are long-term players who have plenty of cash to carry them through this crisis.

We do anticipate distressed opportunities coming from non-core owners and family businesses in resort destinations in Thailand, Indonesia, and Malaysia. With international guests being the main source for such resorts, this segment is going to be the slowest to recover...

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