Real Estate Trusts to spur hotel sales


Real Estate Trusts to spur hotel sales

One of the country’s leading real estate consultants, Jones Lang LaSalle, suggests this year will see a dramatic surge in hotel sales due to the growth of so-called real estate investment trusts (REITs). These trusts are expected to provide a river of funding which will lead to increased sales in the hotel market in general, but with probably a greater emphasis on those located in resort destinations.

Jones Lang LaSalle suggests the REITs have a flexibility not readily available to standard property funds, and this would make them increasingly attractive to investors.

REITs can put their money into completed projects as well as projects which are ongoing, or even obtain loans for yet to be started activities. Property funds, on the other hand, are restricted to investing only in completed projects.

This flexibility for REITs means greater liquidity and this could help spur the volume of hotel transactions. Jones Lang LaSalle believes much of the business spurt will be in the smaller hotel sector, with properties priced between 200 million and one billion baht.

Apart from investment in the capital, which is always a premium spot, REITs are likely to be pouring their funds into Phuket, Pattaya, and Koh Samui in particular. Pattaya, especially, continues to attract strong visitor numbers year on year and this makes the resort city a prime hotel investor location.

Chiang Mai also has its adherents, although a lot of hotels were constructed in the early years of this century and the market hasn’t quite caught up, especially with domestic customers. Even so, the international traveller market has been very strong over the past couple of years, especially with the Chinese.

Jones Lang LaSalle suggests Chiang Mai is one destination which needs to be studied very carefully by any REIT investors as they describe it as a challenging market.

Last year saw vibrant growth in the hotel marketplace in Thailand with sales of US$337 million, a rise of 31 percent on 2012.

In fact, the greater East Asian region has experienced quite stupendous growth within the hotel investment sector. Last year, Singapore had transaction volumes of US$2 billion while China recorded US$1.1 billion. However, both of these were overshadowed by Japan which handled a whopping US$2.7 billion in hotel investment, a figure which was 480 percent up from 2012.

Overall, East Asia and Southeast Asia, led by Singapore and Thailand, saw regional growth jump by an incredible 218 percent from 2012. Despite the gloom and doom forecasts often evident in day-to-day economic forecasts, it does seem there are certain sectors where huge growth is almost the norm, and hotel investment looks to be one of these.