SPECIAL REPORT
WHILE A PRICING GAP BETWEEN CURRENT AND PROSPECTIVE OWNERS IS WIDE AND PROHIBITING IN A WAY , SOME INSTITUTIONAL INVESTORS ARE ACTIVELY CONSIDERING ACQUISITIONS OF HOTEL ASSETS , ESPECIALLY WHEN A LARGE PORTFOLIO IS OFFERED ON MARKET BY JAPANESE ESTABLISHED CORPORATIONS , WHICH WAS RARE DURING THE PRE- COVID PERIOD .
– KOJI TAKABAYASHI
a cap rate expectation , bargaining for lower prices to provide a margin of safety as a buffer for market uncertainties during the pandemic . For quality assets , with good vaccination progress and signs of optimism in 2022 , investor interest will eventually pick up and the expectation gap will narrow , as such opportunities will not come up in a normal circumstance .
Alternatively , some sellers may opt for alternative vehicles such as REITs or joint venture partnerships , which allow them to continue asset ownership while reducing existing hospitality investment and improving overall financial health . In 2021 , the market witnessed the disposal of Royal Orchid Sheraton Bangkok into a REIT with a buyback option by Grande Asset . Singha Estate also secured a JV partner from Myanmar for the development of SO Sofitel Maldives . recovery in the region might not be equal . There is the possibility of virus mutations , sudden surges in COVID-19 cases , delays in lifting border restrictions , differing rates of vaccine rollout across countries , uncertainty in the return of business travelers , and a challenging operating environment .
Zoe Wu , Horwath HTL , China : Price . Most owners still value their hotel assets based on commercial / office / residential values in the neighborhood . Thus , unrealistic pricing is one of the biggest challenges in the market . The ‘ three red line ’ policy may help propel a general understanding / acceptance of a more realistic valuation .
Nikhom Jensiriratanakorn , Horwath HTL , Bangkok : A gap in price expectation between buyers and sellers has been apparent in the marketplace .
Some hotel owners are not under any financial stress due to strong cash flow from nonhotel businesses , low leverage , established lender relationship and government support . They are not in a hurry to cash out assets and can wait for the right price that is in line with their expectation .
Meanwhile , investors have raised
Mandeep Lamba , HVS , India : Asset valuations have been challenging in a near-zero cash flow environment , and the spread between the ask and the offer prices has been widening . The buyers discounting on valuation on account of the COVID impact to the sector are not finding acceptance with the sellers .
Koji Takabayashi , Horwath Japan : From a deal-making point of view , current financial policy by the Japanese authority that banks keep their financing to hospitality asset owners under the current COVIDinfluenced market situation . In the meantime , as it has been almost two years since such government ’ s financial instructions started restricting banks ’ loan decisions , a significant portion of hospitality
70 hotelsmag . com January / February 2022