Investor sentiments in the Asia Pacific (Apac) hotel sector are expected to remain strong in 2025, as revealed in a recent survey conducted by CBRE. The 2025 Asia Pacific Hotel Investor Intentions Survey showed that over 72% of hotel investors surveyed in November and December last year plan to increase their hotel asset acquisitions this year. Out of this, 45% indicated their plans to increase their purchasing volume by more than 10%.
Steve Carroll, the head of hotels, capital markets, Asia Pacific at CBRE, stated that the investors expect hotel and living assets in Apac to have optimistic pricing expectations in 2025, following their strong performance in the past 18 months. This positive sentiment is fueled by the rebound in tourist arrivals in countries such as Japan, Singapore, and Australia. The increase in international arrivals has pushed up hotel room rates in Apac, leading to income growth for hotel operators.
The survey also found that the limited hotel supply in Apac is a major factor in driving investment activity. According to hospitality data intelligence group STR, the hotel supply pipeline in Apac is projected to grow at a CAGR of 2.2% between 2024 and 2028, a significant decrease from the 5% CAGR recorded between 2013 and 2023.
Among the different types of investors, REITs showed the highest net buying intentions at 22%, a significant improvement from last year’s -13%. This indicates a shift from recent years when REITs had negative investment intentions. Institutional investors and property funds followed closely, with 12% and 10% net buying intentions, respectively. Private equity and real estate funds are also expected to be highly active in the Apac hotel sector in 2025.
However, private investors and high-net-worth individuals are expected to drive fewer hotel acquisitions this year. This can be attributed to their increased selling activity as they seek to capitalize on the positive market sentiment following their acquisitions during the previous period of price dislocation.
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Investors are also favoring the upscale and upper midscale hotel categories, primarily due to their operational flexibility and potential for value-added opportunities. This includes the redevelopment, adaptive reuse, and rebranding of existing properties, which offer a less costly alternative to new developments. These categories also have a leaner labor pool, reducing labor and cost pressures.
There is also a growing trend towards long-stay or hybrid hospitality models, such as co-living spaces. This is particularly evident in countries like Japan, Hong Kong, and Singapore, where there is high demand for cost-effective accommodation due to inflexible rental markets. Other emerging trends include a preference for assets with vacant possession, allowing for more flexibility in terms of operator selection and refurbishment works, and a higher interest in limited-service hotels to minimize operational costs.
In terms of preferred investment destinations, Tokyo retained its top spot, followed by Osaka, Singapore, Sydney and Seoul. CBRE attributes this to low interest rates, stable income streams, and solid hotel fundamentals, including growth in daily rates and underlying operating profits. In particular, Seoul has seen an increase in investor activity due to the influx of visitors from mainland China and the consequent rise in daily rates.
Overall, the Apac hotel sector is expected to remain a favorable investment market in 2025, driven by positive market conditions and favorable investment strategies.