Investors on the lookout for hotel opportunities in Asia’s emerging markets

Investors are turning their attention to emerging markets in South East Asia again, on the back of robust hotel transaction volumes in Asia which hit US$620 million in Q1 2013, up 190 percent from the same period in 2012, according to Jones Lang LaSalle.

“Rising visitor arrivals, robust trading performance and positive market dynamics have put emerging South East Asian markets such as Vietnam, Cambodia and Myanmar back into the investment spotlight,” Tom Oakden, Executive Vice President, Investment Sales for Jones Lang LaSalle’s Hotels & Hospitality Group revealed at an industry event co-hosted with Ashurst.

Airlift has been the big game changer for many markets in South East Asia and upgraded infrastructure has enhanced the ease of travel and improved links to the rest of Asia. This is evident in the double digit tourism growth witnessed in Vietnam (15 percent), Cambodia (25 percent) and Myanmar (55 percent) in 2012, when compared with 2011.

“The affordability factor and capital growth prospects some of these markets offer when benchmarked against other more mature Asia gateway cities that have seen huge appreciation in recent years is also a driving factor,” Tom added.

Vietnam is a wonderfully diverse country with spectacular beaches, seven UNESCO World Heritage listed sites and other cultural attractions. Whilst the economy is in recovery mode, the medium to long term potential of Vietnam as an investment destination is being recognised. This is evident in the sale of two Life Resorts properties in Hoi An and Quy Nhon to the Minor Hotel Group in February.

Neighbouring Cambodia is on the cusp of real economic and tourism growth, with rising visitor arrivals and increasing foreign direct investment from countries such as South Korea, Vietnam and China. With limited hotel supply in the key cities of Phnom Penh and Siem Reap and 443 kilometres of unexploited coastline, Cambodia is attracting the attention of both domestic and regional investors and developers.

Perhaps the greatest potential lies in the Myanmar hotel market, which has benefited from a demand-supply imbalance to become one of the best performing hotel markets in Asia. Operators are enjoying strong RevPAR growth from leisure and corporate travellers in hotspots like Yangon and Mandalay. However, until further foreign investment law is enacted and economic reform takes shape, it will be challenging to establish genuine hotel investment sales. That said, international hotel companies are doing their best to secure opportunities with domestic owners and developers, including Accor who is developing three newly built hotels in Myanmar.

Rhonda Hare, head of Ashurst's real estate and hospitality, tourism and leisure practice in Asia, said: "As these dynamic markets undergo rapid development and growth, constant changes in the legal regulatory framework are expected, especially with regard to foreign investment. It will be interesting to observe how the legal regimes evolve as these markets mature and attract more interest from international investors." Rhonda provided an overview of the legal issues for investing in these three markets at the joint seminar earlier in the day.

Sourced: Cambodia News