Asian capital is enjoying increasing success in global hospitality markets, as APAC firms take their expertise worldwide.
While many are driven by of diversification opportunities, limited local scope has also become a factor, Siew Kim Beh, chief financial & sustainability officer, lodging, CapitaLand Investment, told audiences at the inaugural IHIF Asia.
“Singapore has limited land, so we have no choice but to invest beyond our borders,” she said. “If you look at our listed REIT, CapitaLand Ascott Trust (CLAS), which has around S$8.5 billon of assets under management, only 15 percent is invested in Singapore – 85 percent is invested globally.”
Kim Beh, who also has a concurrent role as managing director, Japan and South Korea, at The Ascott Limited, CapitaLand’s lodgings arm, noted that CLAS has a global mandate and presence in 40 countries. “As it is listed in the NAREIT index, it has to be deployed 75 percent in developed markets and 25 percent in developing markets. So that guides the framework of what we do.”
Driven to diversify
David Ling, global head of hospitality investments at City Developments Limited, which is present in Asia, Europe and North America, said: “Diversification is a key driving factor for us. Markets move in cycles, and Asia might be at a different stage to Europe at any one time. Return on investment also drives us to invest globally - high growth markets are important.”
Singapore-based Bobby Hiranandani, co-chairman of Royal Group, who manages the family business alongside his father Asok Kumar Hiranandani, agreed with the other panellists, noting: “Singapore is so mature that we have to go outside for opportunities.”
He said that the firm’s size meant it looked “at opportunities globally that make sense”, including exploring Asian cross border markets such as Australia. He said: “Not every high growth market has the requisite liquidity. But we don’t have to focus quite as much on geographical diversification as we are active in a range of asset classes, from hospitality to commercial and retail.”
Geopolitics in play
Speaking on geopolitical factors, Ling described political and territorial challenges as “disruptive” – but added that “disruption brings opportunities”. He said: “Investment is about location, timing and product. Timing is very critical to drive return on investments. Last year we made a deal in a lifestyle hotel at a 5.5 – 6 percent yield. Today, that same market is seeing 3.9 percent yields.”
He added: “No market is immune to social, economic, and political factors: inflation and interest rates are always an issue. One key thing we need to be looking at in the future is product that is sufficiently differentiated for the customer experience.”
Kim Beh agreed that diversification was important. “One thing that Covid taught me was diversify, diversify, diversify. As we have exposure to 40 different countries, we still had good cash flow during Covid, because borders closed and opened at different times.”
She explained that The Ascott business model also involved the group diversifying, not just geographically, but also by “type of hotel”. She said: “We have spaces tailored for lifestyle, experience and luxury… we are also open to diversifying further to make the portfolio stronger.”
Geographical spread
In terms of the business’ geographical spread, she said that the firm was “fortunate to already be present in most key geographies with on-the-ground investment and management teams that actually feed information on cultural and domestic factors back to us.” She added that this “developed infrastructure” in diverse markets also made it easier to convince the board to let them explore overseas locations still further.
Hiranandani said that Royal Group was targeting “six or seven key destinations that we want to invest in; they are markets where we have our satellites and are markets that we consistently want to go towards”. He added: “We like creating value and we are very location sensitive. In a city, there are often only two square kilometres I would invest in - so we tend to sit back and wait for the opportunities to arise.”
Ling said that the focus on diversification had led to an interesting partnership with Ascott in Singapore at CanningHill Piers in the Singapore River district. The venture will result in the development of a new Somerset serviced residence with a hotel licence, a Moxy hotel, two residential towers and a commercial component. The scheme is slated for completion next year.