Are tropical resorts the hidden gems of the hospitality industry?

Exploring Southeast Asia's Resort Investment Hotspots

In 2023, Asia Pacific’s hotel industry will likely attract $10.1 billion in investment volumes, according to JLL’s recently published Hotel Investment Highlights H2 report. Looking deeper, the analysis also shows a growing interest among investors in resort destinations. As a percentage, over 11% of total investments are presented by resorts at the end of 2021, up from 6% in 2016. As investment interest is expected to grow exponentially in the coming years, a more detailed analysis of resort destinations in Southeast Asia, specifically in more active resort destinations such as Bali, Danang, Koh Samui, the Maldives and Phuket, will be demanded by investors during the due diligence and decision-making process.

Key Resort Investment Trends

^{Source: JLL, RCA (Data as of 9 October 2023, 10-Year Volume 2013 – 3Q 2023)}

^{Source: JLL, RCA (Data as of 9 October 2023, 10-Year Volume 2013 – 3Q 2023)}

Over the last decade, USD 4.6 billion in capital have been invested in Southeast Asia resorts, representing an average total volume of USD 457 million annually.

Click on each market below to find out more.

Buyer Profile

^{Source: JLL, RCA (Data as of 9 October 2023, 10-Year Volume 2013 – 3Q 2023)}

^{Source: JLL, RCA (Data as of 9 October 2023, 10-Year Volume 2013 – 3Q 2023)}

Bali and Danang are markets registering substantial increase in room supply every year, providing ample opportunities for hotel operators to secure a presence through Hotel Management Agreements (HMA) as compared to destinations like the Maldives or Phuket. Therefore, in markets with limited possibilities for hotel operators to secure HMAs, they are compelled to seek strategic partnerships, joint ventures, or acquisitions. This can be seen in the recent acquisition of the Amari Havodda by Minor Hotels this year, as well as the Faarufushi by The Emerald Collection in 2021, both sold by JLL.

Price/Key by Positioning 

^{Source: JLL, RCA (Data as of 9 October 2023, 10-Year Volume 2013 – 3Q 2023)}

According to JLL’s Hotel Investment Highlights Asia Pacific H2 2023 report , the average price per key for hotels in the Asia Pacific region is USD 291,600. However, in resort destinations, the average price per key is higher at USD 387,800. The Maldives stands out as the most expensive option across all segments compared to other resort markets. The luxury segment in the Maldives commands a median price per key of approximately USD 1.2 million, which is four times higher than the average in the other four mentioned destinations.

The Maldives' ability to generate higher Revenue Per Available Room (RevPAR) compared to other resort destinations like Bali or Phuket contributes to its higher price per key. This higher RevPAR translates into significantly higher Gross Operating Profit (GOP) per room in the Maldives. In the upscale segment, the average GOP per room ranges from USD 80,000 to USD 120,000 per year, while in the luxury segment, it reaches USD 150,000 to USD 250,000 per year.

In contrast, in Southeast Asia markets, the GOP per room is almost 50% lower than that of the Maldives, ranging from USD 40,000 to USD 70,000 per year. Even in the luxury segment, Southeast Asia experiences lower GOP per room at USD 90,000 to USD 130,000 per year.

Despite similar capitalization rates across these resort markets, the significant difference in GOP per room has a real impact on the price per room, making the Maldives the most expensive option in terms of hotel investment in the region.
 

Cap Rate & Cost of Debt

^{Source: JLL, various local banks in each market}

Investors in the resort market are currently encountering a notable challenge between cap rates and prevailing loan interest rates. This discrepancy is particularly pronounced in destinations like Bali and Danang. In some countries, offshore banks offer the option of loans denominated in US dollar, providing an alternative financing avenue. Despite these challenges, corporates and owner-operators in the resort market remain actively engaged, thanks to a reduced reliance on debt financing for their investments.

A Resort Investment Journey Awaits

The resort markets in Southeast Asia offer a range of investment opportunities and unique features that appeal to potential investors. While the Maldives leads with its higher price per key and revenue potential, investors such as corporates and owner-operators in the resort markets continue to display resilience and reduced reliance on debt financing. Through careful evaluation of market dynamics and a focus on each destination's distinctive characteristics, investors can embark on a rewarding resort investment journey in Southeast Asia's vibrant markets.

Disclaimer
The information above has been prepared for guidance purposes only as at the date of this article. The interest rates and commercial terms may depend on specific circumstances and latest legislation; therefore, readers should seek further professional advice.