Asia Pacific’s hotel market is buzzing, with investors flocking to the sector as it outpaces traditional real estate investments. And 2024 marks the turning point for JLL, say Nihat Ercan, chief executive officer, Asia Pacific, hotels and hospitality, and Jaideep Dang, the company’s managing director, hotels and hospitality group, India.
“Hotels have become a core part of many portfolios,” Ercan said. The reason? Hotels can adjust prices daily, unlike offices or retail spaces tied to fixed leases.
India is riding this wave. Hotel transactions are expected to reach $430 million this year, up from $350 million in 2023. Recent deals, like the ₹450 crore sale of Mumbai’s Holiday Inn, showcase the scale of investment. However, as space in major cities runs out, new hubs with hospitality and commercial areas are being built as clusters of hotels, restaurants, and office spaces, strategically located.
In an interview with Mint during his recent visit to India, Ercan said Delhi’s Yashobhoomi and Mumbai’s airport district were the next growth zones, signaling a shift in where the action is happening in India’s hotel scene.
JLL is a commercial real estate and investment management company that has facilitated half a dozen transactions in India’s Delhi NCR, Mumbai, Bengaluru, and other large cities in the last few months.
While there is no direct international investment in hotel projects in India, he said there is interest. “India is piquing people’s attention not just at a direct level, but at an indirect level. We’re having conversations with traditional limited partners, who would sit behind fund managers looking for exposure to the Indian hospitality market from a global sovereign perspective. Earlier, they were not interested,” he said.
What’s changed is the narrative, with China being replaced as the next big growth market as it goes through domestic challenges in the housing sector, which has also impacted the hotel sector.
“India is the most populous market in the world; it has a burgeoning middle class and significant tourism potential. It’s also got some very good home-grown brands that are looking to go overseas and expand,” he added.
He said there is a lot of buoyancy across the Asia Pacific real estate market because hotels have become a core investment for many businesses and HNIs who want diversified portfolios since the pandemic.
“Hospitality and living are now a key focus for a lot of investors because hotels are able to dynamically price their rooms every day based on demand, as compared to other real estate assets which are on fixed leases,” he said. “In 2024, within the Asia Pacific region, 14% of all investments in commercial real estate were dedicated to hotels—the highest JLL has seen historically. This is because there are still expectations of growth in this sector. Domestic demand for hotels in Asia Pacific is very high, and while international demand for hotels and flight supply is still not back, they will grow further.”
About 72% of the transaction volume was for operational hotels across tiers, 23% for under-construction hotels, and the rest for land leases.
“There is also a relatively benign supply outlook (of new hotels) because development and construction costs are still very high. Development finance is difficult to get, and new developments are still restricted. So, more investments are coming into the sector, not just from private equity funds, but also from corporates, developers, and high net worth investors. Private equity is also looking at hospitality as a way to diversify their investments. India has been a beneficiary of this as well,” he said.
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Though growing from a much lower base, the company anticipates India will see spending of about $430 million ( ₹37,500 crore) on hotel transactions in this calendar year 2024. This number was around $350 million or ₹2,870 crore last year. This year’s transaction growth is driven primarily by mid-scale to upscale hotels.
Midscale hotels offer essential amenities and services at moderate prices, targeting budget-conscious travellers, while upscale hotels have high-end amenities and services for guests seeking a more premium experience at a higher price point, just short of luxury.
Hospitality and living are now a key focus for a lot of investors because hotels are able to dynamically price their rooms every day based on demand.
In the first half of 2024, listed hotel companies led the transactions, accounting for 44% of the total transaction volume, followed by owner-operators (30%), and HNIs, family offices and private hotel owners (26%). The transactions ranged from operational hotels in tier 1 markets and leisure locations to land leases in airport districts for greenfield development.
Owner-operators are hotel owners who directly manage the day-to-day operations of their properties rather than outsourcing management to a third-party operator or hotel management company.
“Transactions are happening every quarter, across big and small hotels in tier one, two, and three cities. These are also more brownfield projects or already operational hotels which have the ability to be refurbished rather than new projects or greenfield ones. On a single-asset sale basis, this is the highest volume we’ve ever seen in India. In fact, JLL traded the single highest asset in the market—Holiday Inn in Mumbai at a valuation of ₹450 crore or $55 million last month.”
The company also facilitated the sale of other big-ticket assets like the Courtyard by Marriott in Aravalli hills, Faridabad, from the owners of the Mankind Pharma family to Chalet Hotels for ₹315 crore. Earlier this month, it facilitated the SAMHI Hotels Ltd transaction where the company acquired a 142-room, 4-star hotel in Bengaluru’s Whitefield area for ₹205 crore, which was formerly managed by ITC under the Fortune brand.
Earlier this year, it made three sale transactions in Goa, including two land monetizations at the new Manohar International Airport at Mopa, Mint first reported.
Pockets of development
“India’s hotel investors are now a healthy mix. While previous years saw high-net-worth individuals and family offices as the most prominent buyers, this year, the mix is led by publicly listed companies and institutional enterprises. So we see this as emerging signs of a maturing hotel investment market landscape where the buyer is becoming more informed,” he added.
“Private equity participation is still lagging a little because of other issues of scale, timing, etc. But it is definitely coming in.”
Even though the demand for hotels is growing, the country is staring at an issue where bigger cities now have little or no space left for new hotel developments in central business districts. But Dang said that should not be a problem as India’s growth story will now come from new pockets of development.
“We’ve just been mandated to take to market five plots, of the 21 plots at New Delhi’s Dwarka area’s YashoBhoomi. So we are in the interest of putting the strategy together and then taking them to market. This will be the next Aerocity and a story for the next 5-7 years of development. There will be new supply unlocked across different cities, in IT parks, airport areas, etc.” he said.
For Mumbai, the growth will come similarly around the international airport. That region has 21 plots, including West Mumbai. Goa also has developments coming up near its new airport.
“We are also seeing that 45% of all hotels being signed now are upscale hotels. This was not the case earlier when it was dominated by midscale hotels. We are also seeing that there is a resort story in India now. Many bigger players are now diversifying into resorts and leisure properties to diversify their portfolios,” he said.
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