JLL: private equity to target emerging Asia hotel sector

‘Good potential’ for private equity investment to keep growing in the hospitality sector, with Southeast Asian countries such as Cambodia seeing 25 percent growth in tourism, according to global property services firm Jones Lang LaSalle.

Private equity firms could wade into the hotel sector in emerging Asia markets for fresh investments in the coming months, according to a Jones Lang LaSalle expert.

Tom Oakden, executive vice president of investment sales for JLL’s hotels and hospitality group, said:“I anticipate we will see more private equity investment [in emerging markets] this year, while it still will struggle to be competitive in established markets.”

Oakden was speaking in the wake of JLL’s latest report, which shows investment in Asian hotels increased to $620 million in the first quarter of this year – up 190 percent year-on-year. Private equity investors made up 20 percent of that investment value, with the figure coming largely from Alpha Investment Partner’s $120 million investment in the Ibis Novena in Singapore.

Oakden said the story in Asia was one of growth in emerging markets like the Southeast region, where tourism in certain parts have grown particularly fast thanks to improved infrastructure and more open laws, which have started to permit more solid links with the rest of Asia.

Vietnam’s tourism industry, for example, grew 15 percent between 2012 and 2011; Cambodia had 25 percent growth in tourism in the same period; and Myanmar saw a staggering 55 percent growth in tourism year-on-year.

Hotel investments in Southeast Asia primarily are banking on the continued growth of tourism in the region – and Oakden said he sees no reason why the sector will not continue to grow for another few years.

“There is good potential for [private equity] investment to keep growing – there is greater risk in emerging markets, but greater return potential,” he said. Although Singapore is more of an established market, he further explained that he would expect to see most investment growth in emerging markets, given both market growth and the competitive advantage that firms have there.

Private equity firms have a competitive advantage in emerging markets, while more established markets such as Japan and Hong Kong have a plethora of REITs and other private capital chasing assets, making it harder to find an edge there, Oakden added.