Hotel Values May Fall Up To 30% - JLL

Hotel values could fall as much as 30% across the Asia Pacific due to Covid-19 according to JLL Hotels


Key points:

  • Mike Batchelor, CEO JLL Hotels - "I expect there will be a 10-30% decrease in hotel values"

  • Yields may soften in line with falling values

  • Tier-two and leisure destinations hardest hit


Mike Batchelor, a 25-year hotel transaction veteran and CEO of JLL Hotels Asia-Pacific, said that hotel values could fall as much as 30% across the Asia Pacific region, including in Australia, because of the impact of COVID-19.


"I expect there will be a 10-30% decrease in hotel values across the region"


"Core CBD markets like Sydney, Melbourne and Brisbane will be at the lower end of that scale as hotels in those markets don't trade that often. But hotels in tier-two and leisure destinations will be at the upper end of the scale."


Driving the reduced valuations will be lower cash flows and earnings.


"There's a lot of stress out there. You can't cut an industry off at the knees and not have stress," Mr Batchelor said.


"When JobSeeker is removed and you start to see banks looking for debt repayment moratoriums to end, then that stress will turn to distress in a number of markets."


Mr Batchelor expected that yields would soften in line with falling values.


"There was tremendous institutional investment in hotels in the last decade, with yields coming very close to those for CBD offices.


"Given what COVID-19 has done to cash flows, I think it will impact yields, though it's too early to say what that impact will be."

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