The Asia Pacific (APAC) hotel sector is set to experience strong investment activity in 2025, as per the latest findings from a survey conducted by CBRE. The 2025 Asia Pacific Hotel Investor Intentions Survey, conducted in November and December last year, revealed that over 72% of hotel investors plan to purchase more hotel assets this year.
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Out of the respondents, 45% expressed their intention to increase their purchase volume by more than 10% this year. According to Steve Carroll, head of hotels, capital markets, Asia Pacific at CBRE, after performing well over the past 18 months, investors expect hotel and living assets in APAC to have the most positive pricing expectations in 2025.
The survey found that the rebound in tourist arrivals, especially in places such as Japan, Singapore, and Australia, is driving the healthy buying intentions. This has led to an increase in hotel room rates, ensuring continued income growth for hotel operators in the region.
Furthermore, investors are encouraged by the limited hotel supply in APAC. According to CBRE, the hotel supply pipeline in APAC is projected to grow at a CAGR of 2.2% between 2024 and 2028, which is significantly lower than the 5% CAGR recorded between 2013 and 2023.
The breakdown of investment intentions by investor type showed REITs having the highest net buying intentions, at 22%. This is a significant contrast from the -13% recorded in last year’s survey. The report states that after several years of negative net investment intentions, REITs are now planning to buy more assets in 2025.
Institutional investors and property funds follow closely behind, with net buying intentions of 12% and 10% respectively. CBRE noted that private equity and real estate funds were more active in 2024, and the momentum is expected to continue in 2025.
However, private investors and high-net-worth individuals are likely to drive fewer hotel acquisitions this year. These buyers, who were the most active in the past two years, are expected to be more involved in selling activities this year to capitalize on the improving market sentiment after acquiring assets at lower prices.
The survey found that respondents favored a value-add strategy for investments in 2025. In select markets, assets have been priced in a way that investors believe they can achieve value-add returns by acquiring assets with core risk profiles. This has led to the upscale and upper midscale hotel categories being ranked as the most attractive asset types for investment, surpassing the upper upscale category that was at the top in last year’s survey.
The report explains that this shift is due to the operational flexibility and greater potential for value-added opportunities offered by the upscale and upper midscale segments. These opportunities include redevelopment, adaptive reuse, and rebranding of existing properties, which provide a more cost-effective alternative to new developments. Additionally, these segments typically have a leaner labor pool compared to higher-tier assets, reducing labor and cost pressures.
In line with this, investors are also turning to long-stay or hybrid hospitality models, with a growing appetite for converting assets into co-living spaces. This trend is expected to gain traction in markets such as Japan, Hong Kong, and Singapore, where there is a demand for affordable accommodation in relatively inflexible rental markets.
Another emerging trend is an increased preference for assets with vacant possession at the time of acquisition, allowing for more flexibility in terms of operator selection and refurbishment works. Limited-service hotels have also seen a rise in interest from respondents, as investors focus on minimizing operational costs.
Tokyo retained its top position as the preferred city among hotel investors, supported by low interest rates and stable income streams generated by hotel properties. Osaka also made it to the top five cities for similar reasons. Singapore and Sydney were also ranked among the top cities, with CBRE attributing it to strong hotel fundamentals, including growth in daily rates and underlying operating profits. Seoul also stood out, with an increase in daily rates driven by more visitors from mainland China, leading to a rise in investor activity in recent months.
Overall, the survey showed that investors are confident about the APAC hotel sector’s potential in 2025, with strong buying intentions fueled by a rebound in tourism and limited hotel supply. This optimistic outlook is also supported by the shifting preferences towards the upscale and upper midscale segments, as well as emerging trends such as long-stay and hybrid hospitality models.