JLL: Investment volume in high-end hotels in the Asia-Pacific region increased by 77% compared to 2017 to about 2.1 billion US dollars last year, with the Hong Kong market leading the way.

Jones Lang LaSalle (JLL) pointed out that there has been a significant increase in demand for upscale hotels in the Asia-Pacific region, with transaction volumes expected to increase by 77% to around $2.1 billion by 2025 compared to 2017, making it one of the largest annual capital investments since pre-pandemic levels (over $2.4 billion in 2019). Different markets in the region have shown varied performances, with Hong Kong continuing to remain a stable player in the Asian core gateway hotel market. Despite the highly concentrated ownership and structural barriers in the local market, its overall performance remains outstanding. JLL mentioned that core upscale hotel assets in Hong Kong are predominantly held by local large conglomerates, family offices, long-term strategic investors, and high-net-worth individuals. This ownership structure limits market liquidity, resulting in a scarcity of noteworthy transaction cases, making it difficult for institutional investors to have consistent reference points. As a result, Hong Kong's upscale hotel market continues to exhibit a highly concentrated ownership structure driven by individual transactions, rather than a highly liquid trading market. The limited addition of new supply in this scarce market environment provides strong support for hotel operating performance. Recent market activities have focused mainly on renovations, repositioning, or re-openings, rather than adding new supply. With cautious expansion and limited new supply, Hong Kong's upscale hotel market is benefiting from the recovery in demand driven by mainland Chinese tourists, long-haul travelers, business events, and major events. Assets located in prime locations and with recent investment are best positioned to take advantage of the upward potential brought by Average Daily Rate (ADR). However, faced with significant pressures from operating costs such as labor, utilities, and maintenance, owners and investors are no longer interpreting the market solely based on the growth of Revenue per Available Room (RevPAR), but are more focused on whether income recovery can a sustainable increase in Gross Operating Profit (GOP) margins. Kelvin Chen, Senior Vice President of Hotels and Tourism Real Estate at Jones Lang LaSalle (JLL) Hong Kong, said: "For investors, upscale hotels in Hong Kong are still a category worth closely watching, not because of frequent market entry opportunities, but rather because their scarcity drives up asset values. The combination of demand recovery, limited supply in prime locations, high reset costs, and concentrated ownership, among other factors, means that rare opportunities in the market often create considerable value. Looking ahead, the market investment stance is expected to remain focused on 'meticulous selection', with the most attractive opportunities depending on asset quality, capital expenditure strategies, operational repositioning, and flexible property usage, rather than solely relying on overall market growth."