Macao Tops List of Hot Hotel Investment Markets

SINGAPORE-The standout hotel investment markets in the Asia Pacific are Macao, Sydney, Hong Kong and the Maldives Islands, according to Jones Lang LaSalle managing director Scott Hetherington, who spoke on the topic here last week at the 7th Asia Pacific Hotel Investment Conference. The markets offer hotel investors and operators opportunity for above-average trading performance growth and capital appreciation, he said.The top performer is Macao, where arrivals jumped 3.1% in 2003 to 11.9 million despite the SARS outbreak that affected most Asian markets during the first half of the year. Part of the that increase included a 35% spike in arrivals from Mainland China, which Hetherington attributes to an easing of travel limitations for mainland residents from selected cities in China.”The market is driven by a proactive government and some US$3 billion is being invested into the tourism and gaming industry,” said Hetherington. “The real potential for Macao is to become a destination resort, offering a broad cross section of facilities at the mouth of the Pearl River Delta.” Concurring with that statement is Starwood Hotels, which announced this week it will open the first resort property under its W Hotels brand in Macao. The W Maldives-Fesdhu Resort is scheduled to open in late 2005. The resort is a joint venture of Starwood and Universal Enterprises Ltd. It will feature 80 over-water and beachfront villas on a private island. As with Macao, the improved outlook for Hong Kong hotels can be attributed to an increase in visitors from Mainland China “We have certainly witnessed a profound shift in sentiment in Hong Kong since the depths of the SARS crisis in May 2003,” says Hetherington. “Building on from the 7.3% growth in visitor arrivals during the final quarter of 2003, we expect the continued relaxation of visa requirements for Mainland Chinese visitors will lead to increased hotel occupancy and rates across all sectors throughout 2004.”Syndey’s strength as a hotel investment market comes not only from a rise in international arrivals but also a reduction in supply. “As a result of residential conversions, the Sydney hotel market has seen a 14% reduction in supply since the Olympics in 2000,” says Hetherington. “As this is combined with a 7.3% increase in arrivals to Australia during the March quarter 2004, we forecast strong growth in room yield and asset values for Sydney over the next few years.”Regarding the Maldives Islands, Hetherington says it is one of the most pristine environments in the world with a limited, well-branded supply of upper-tier hotels and limited price sensitivity. “These factors, as well as the recent release of 11 islands for small scale development, make it an ideal investment destination,” he says.The Asian hotel market saw US$1.5 billion worth of hotels change hands during 2003, driven largely by sales in Japan, which accounted for 56% of total. Australia saw 25 major transactions totaling A$826 million. Buyers included property funds, high net worth individuals, hotel owner operators and institutional investors.