PETALING JAYA: Global property consultant Knight Frank Malaysia sees a hike in the number of investors in Malaysia’s hotel investment over the next year as shown in its market survey report.
Based on the Malaysian hospitality investment intentions survey by Knight Frank, 64% of respondents that consist hotel owners, operators, and owner-operators from their investment perspective are considering increasing their exposure to the Malaysian hotel sector. That is a sharp hike in comparison with 36% back in 2020.
Meanwhile, 36% of respondents are showing no interest in increasing their exposure to hotels, which is a significant drop compared to the 64% in 2020. That is a positive sign that sentiment towards the sector is returning.
Knight Frank Malaysia executive director for capital markets James Buckley said in a statement yesterday that given the last two tumultuous years, it is not surprising that investments in hotels across Malaysia fell from a 2017 high of RM2.2bil to just RM556mil in 2020 and RM177mil in 2021.
“Since our first survey, we have seen a rapid and widespread distribution of Covid-19 vaccines globally, an increasing list of countries opening their borders to international travellers, and airlines re-establishing some of their flight networks.
“International traveller’s confidence is slowly returning, filtering through to the 2022 survey with investor sentiment recovering. We do expect to see an increasing number of hotel transactions over the next 24 months,” he added.
The report showed that investors continued to seek high returns to offset the risk of investing in the sector with 33% of respondents targeting a net yield of above 7% versus 36% in 2020 when acquiring a four to a five-star hotel in Malaysia, while 26% are targeting net yields of 6%-7% versus 29% in 2020. In 2020, 19% of respondents accept a net yield of 5%-6% versus 29% in 2020.
“I think investors are seeing 2022 as a good time to invest in Malaysian hotels. They can see the economy is recovering, especially now that the borders have opened.
“Many can see the strong pent-up demand for holiday travel and in the short term, Singapore tourists, coupled with domestic demand will drive hotel performance in 2022,” Buckley noted.
For 2022, Buckley expects hotel transaction volumes to increase as the price gap between vendors and purchasers will narrow, as banks will begin to lend again as they see improvements in the sector.
The majority of the hotels have conservative levels of gearing with 43% having less than 49% loan to value ratio while 17% have no debt at all. The survey found that 31% have a loan to value of between 50% and 69% and 9% have high gearing of above 70%.