Hotel investment activity in Thailand rebounding strongly
JLL expects the total transaction value in 2021 to grow more than five times the volume witnessed last year
Investment volume in Thailand’s hospitality sector in 2021 is expected to grow more than five times the volume witnessed in 2020, reaching THB 12 billion by year end, JLL predicts. Year to-date, 13 properties have been sold, totaling THB5 billion of combined value, compared to four properties worth THB1.9 billion in total sold in 2020.
JLL’s data tracks sale transactions of hospitality assets that are operated to international standard. These include investment-grade hotels, resorts, and serviced apartments in Bangkok and Thailand’s key leisure markets.
Chakkrit Chakrabandhu Na Ayudhya, Executive Vice President, Investment Sales, Asia, JLL Hotels & Hospitality Group, says “Hotel investment activity in Thailand has recovered to the pre-COVID-19 level. We anticipate the total investment volume this year to reach THB12 billion, if ongoing deals with THB7 billion of combined value are completed by year end as expected. This means the total investment volume for 2021 could surpass the 10-year average of THB10 billion per annum witnessed between 2009 and 2019.”
“At JLL, we have recently closed the sale of 138-key Citadines Sukhumvit 23 Bangkok and are working on more than 10 hotel deals with a combined value of over THB 17 billion. Of these, two are likely to be concluded by the end of this year,” he continues.
Buoyant hotel investment activity this year has been driven by availability of investment-grade assets for sale, strong demand from investors, and the narrowing gap between buyers and sellers’ price expectations, according to JLL.
Pimpanga Yomchinda, Vice President, Investment Sales, Asia, JLL’s Hotels & Hospitality Group, comments “As the pandemic prolongs, more hotel owners including property developers and hotel operators decided to dispose one or two assets in their portfolio in order to improve liquidity. These sellers have also shown more flexibility in pricing. On the other end, buyers have adopted a more realistic approach on price expectation, realising that light at the end of the tunnel is starting to show and discounts vary from asset to asset.”
Based on observations by JLL, luxury and iconic hotel assets offer little or no discount due to their irreplaceable nature and owners’ profiles. In addition, owners of these hotels are generally less affected by the pandemic compared to others.
JLL’s observations also show that prices of investment-grade assets in Bangkok have relatively remained firm, compared to resort markets, and bigger discounts are witnessed in second tier markets, especially in midscale properties.
By number of transactions completed so far this year, 90% of the buyers are local high net worth families, well-capitalised corporates and international private equity funds establishing or expanding their hotel portfolio. By transaction value, foreign investors this year are expected to account for 62% of the hotel buyers in Thailand, when taking into account the remaining hotel deals that are likely to be closed by year end.
Ms. Pimpanga comments “By transaction value, Thailand’s hotel investment has witnessed a remarkable increase in foreign participation this year, particularly when compared to the past 10 years that saw foreign participation account for 37% per annum on average.”
Whilst JLL expects to see continued interest from foreign investors in the coming years, the firm also believes that the ease of restrictions on cross-border travelling would encourage more participation from foreign investors in 2022, leading to higher competition for quality assets.
With a number of larger deals in the pipeline and investor confidence in long-term outlook for Thailand’s tourism and hotel industry, it is quite realistic to expect hotel investment volume in 2022 to make a post-COVID-19 new high,” Ms Pimpanga concludes.
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.6 billion in 2020, operations in over 80 countries and a global workforce of more than 95,000 as of September 30, 2021. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.