According to a recent CBRE survey, the Asia Pacific (Apac) hotel sector is expected to see continued strong investment activity in 2025. The survey, which was conducted last November and December, found that over 72% of hotel investors plan to acquire more hotel assets this year. Of those, around 45% are looking to increase their purchasing volume by more than 10%.
Steve Carroll, head of hotels, capital markets, Asia Pacific, CBRE, explains that investors are optimistic about the pricing expectations of hotel and living assets in the region in 2025, following their strong performance over the past 18 months. The rebound in tourist arrivals in key markets such as Japan, Singapore, and Australia has also contributed to this positive outlook. The increase in international visitors has led to an uptick in hotel room rates, ensuring a continuation of the income growth achieved by hotel operators last year.
The survey also highlights the limited hotel supply in Apac as a driving factor for the healthy buying intentions of investors. Data from hospitality data intelligence group STR shows that the hotel supply pipeline in Apac is projected to grow at a CAGR of 2.2% between 2024 and 2028, significantly lower than the 5% CAGR seen between 2013 and 2023.
In terms of investor types, REITs had the highest net buying intentions at 22%, a sharp contrast to last year’s survey, which saw a -13% net buying intention. Institutional investors and property funds followed closely at 12% and 10%, respectively. CBRE notes that private equity and real estate funds are expected to remain active this year.
However, private investors and high-net-worth individuals are expected to drive fewer hotel acquisitions in 2025. After being the most active buyer type in the region for the past two years, private investors now anticipate a higher level of selling activity this year as they look to take advantage of the improving market sentiment after acquiring assets at a discount.
The survey also shows a shift in preference towards the upscale and upper midscale hotel categories for investment in 2025, overtaking the upper upscale category that was ranked highest in last year’s survey. CBRE attributes this to the operational flexibility and greater potential for value-added opportunities in the upscale and upper midscale segment, including redevelopment, adaptive reuse, and rebranding of existing properties. This segment also has a leaner labour pool, resulting in lower labour and operational costs.
Investors are also showing increased interest in long-stay or hybrid hospitality models, with a growing appetite for converting assets into co-living spaces. This trend is expected to gain momentum in markets like Japan, Hong Kong, and Singapore, where there is demand for affordable accommodation in relatively inflexible rental markets.
Other emerging trends identified in the survey include a 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 are also gaining more interest from investors as they aim to minimize operational costs.
Among the top cities preferred by hotel investors, Tokyo remains in the lead due to low interest rates and stable income streams generated by hotel properties. Osaka also made it to the top five due to similar reasons. Singapore and Sydney also ranked high, supported by solid hotel fundamentals such as growth in daily rates and underlying operating profits. Seoul also stood out, with more visitors from mainland China driving daily rates in recent years, leading to increased investor activity in recent months.