Investment sentiment for the Asia Pacific (Apac) hotel sector is predicted to remain robust in 2025, according to a study by CBRE. The 2025 Asia Pacific Hotel Investor Intentions Survey, conducted in November and December last year, revealed that over 72% of investors surveyed are planning to increase their hotel asset acquisitions this year.
Out of the respondents, 45% are looking to raise their purchase volume by more than 10%. “Following a strong performance in the past 18 months, investors are expecting optimistic pricing expectations for hotel and living assets in Apac in 2025,” shares Steve Carroll, head of hotels, capital markets, Asia Pacific, CBRE.
The survey found that this healthy investment sentiment is driven by the rebound in tourist arrivals, particularly in countries like Japan, Singapore, and Australia. “The increase in international arrivals from key markets has led to the rise in hotel room rates, ensuring a continuation of the income growth that hotel operators experienced last year,” adds Carroll.
In addition, investors are encouraged by the limited supply of hotels in Apac. Data from hospitality data intelligence group STR reveals that the hotel supply pipeline in Apac is expected to grow at a CAGR of 2.2% between 2024 and 2028. This is significantly lower than the 5% CAGR recorded between 2013 and 2023.
The breakdown of investment intentions by investor type shows that REITs have the highest net buying intentions at 22%. This is in stark contrast to last year’s survey, which recorded -13%. “After several years of having net negative investment intentions, REITs have indicated that they plan to buy more assets in 2025,” the report states.
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The report also reveals that institutional investors have the second-highest net buying intentions at 12%, followed closely by property funds at 10%. CBRE notes that private equity and real estate funds have become more active in 2024 and this trend is expected to continue in 2025.
However, private investors and high-net-worth individuals are expected to make fewer hotel acquisitions this year. “After being the most active buyer type in the region for two years, private investors stated that they will be more likely to sell in 2025, taking advantage of the improving market sentiment after acquiring assets during a period of price dislocation,” adds the report.
Targeting upscale and upper midscale assets
The survey participants favored a value-add investment strategy for 2025. CBRE notes that in some markets, assets have been repriced to the point where investors believe they can achieve value-add returns by acquiring assets that align with their core risk profiles.
As a result, the upscale and upper midscale hotel categories have been voted the most attractive asset types for investment this year, overtaking the upper upscale category, which was the top choice in last year’s survey.
The report attributes this shift to the operational flexibility and greater potential for value-added opportunities in the upscale and upper midscale segment. These opportunities include the redevelopment, adaptive reuse, and rebranding of existing properties, which offer a more cost-effective alternative to new developments.
The segment also has a smaller labor force compared to higher-tier assets, which reduces labor and cost pressures.
In light of this transition, investors are also turning to long-stay or hybrid hospitality models. CBRE cites the growing appetite for converting assets into co-living spaces as an example. This trend is expected to continue gaining momentum in countries like Japan, Hong Kong, and Singapore, where there is a demand for affordable accommodation in relatively inflexible rental markets.
Other emerging trends include investors’ increasing preference for assets with vacant possession at the time of acquisition, allowing for flexibility in terms of operator selection and refurbishment works. Limited-service hotels also saw higher interest from respondents, as investors remain focused on minimizing operational costs.
Preferred destinations and emerging trends
The survey respondents ranked Tokyo as their top city of choice for hotel investments, 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 also ranked among the top cities, which CBRE attributes to strong hotel fundamentals, including growth in daily rates and underlying operating profits. Seoul also stood out, as the rise in visitors from mainland China contributed to the increase in daily rates in recent years, leading to a surge in investor activity in recent months.