Singapore, May 15, 2003 � Jones Lang LaSalle Hotels, who tracks major hotel sales (over US$2.5 million), recorded a total of 21 hotel sales comprising 5,465 rooms for over US$670 million across Asia in 2002.   Japan and Hong Kong were the hotspots for investment activity in terms of sales value.  The firm�s newly released Asia Digest, Volume Vl 2003 provides a review of operating performance of hotels in Asia including a summary of hotel sales in 2002 and the future outlook for activity in 2003.

�2002 was an encouraging year in terms of hotel transactions and acquisition of debts particularly in Japan.  A rising number of bankruptcies and the restructuring of companies under pressure by creditors has spurred activity in this historically illiquid market.  We expect this trend to continue into the medium term� said Scott Hetherington, Managing Director, Jones Lang LaSalle Hotels Asia.

�2002 also saw a flurry of investment activity in India as many hotels were finally sold as part of the Indian government�s privatisation program.  The majority of purchasers were domestic owner/operators and hotel investors� said Mr Hetherington.

In Singapore, the sale of the Robinson Hotel is notable, being the first Singapore hotel sold as a going concern since 1994.  We have also just commenced the marketing of 41 Bencoolen, Singapore, an existing 14-storey building, with approval to convert into a 213-room hotel.  The property is currently the only hotel development in Singapore for sale and the first for this year.

Looking forward, the markets of Tokyo, Beijing, Bangkok and Shanghai are current investor favourites according to Jones Lang LaSalle Hotels� latest Hotel Investor Sentiment Survey (HISS, January 2003).  These markets are widely recognised as key gateway cities and/or the subject of strong growth within the region. 

With the prevailing SARS situation in Asia, general sentiment has been affected, particularly that of investors from Singapore and Hong Kong.  �That said, we expect to see continuing interest shown by family companies and regional groups out of Hong Kong and Singapore.  We are experiencing buying activity by well capitalised Thai groups, as well as funds based in Japan for assets throughout the region� said Mr Hetherington.

Asia hotel transactions in perspective

During 2002, Jones Lang LaSalle Hotels� database recognised US$3.6 billion worth of hotel transactions in the United States and a further US$5.3 billion worth of transactions in Europe.

Asia�s total volume of hotel transactions during 2002 corresponds to a 50.4% decrease in the total value of hotels transacted during 2001, a difference attributable to the big-ticket sale of the Regent Hong Kong for US$346.2 million in 2001. 

Jones Lang LaSalle Hotels� Asia Digest Vol Vl 2003 Edition provides a comprehensive analysis of 22 major hotel markets spread over 12 countries in Asia.  It also features an economic report card, tourism market examination and future supply tables.

Active investment market testifies Japan�s hotels are hot property

A rising number of bankruptcies and the restructuring of companies under pressure by creditors created a flurry of hotel investment activity in Japan during 2002, according to latest edition of Jones Lang LaSalle Hotels� Digest Asia. 

�2002 was an unusually good year in terms of hotel transactions for this historically illiquid market and we believe this level of investment activity will continue� said Tomohiko Sawayanagi, Senior Vice President Jones Lang LaSalle Hotels, Tokyo.  �The impact of SARS on investors� appetites has been limited as investors continue to be drawn by the prospect of participating in the world�s second largest economy.  Due to a prolonged period of economic recession and currency deflation in Japan, many investors feel that now is a good time to enter the market.� 
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Jones Lang LaSalle Hotels gauged investor sentiment at their recent Global Hotel Forum, in Tokyo.  �It was evident that many people believe hotel investment activity in Japan will only accelerate in the near future as Japanese banks are faced with increasing pressure to write off non-performing loan assets collateralised by hotels� said Mr Sawayanagi.

Looking at hotel trading performance during 2002, Tokyo�s first class and luxury market showed continued growth from 2001.  Occupancy increased 6.8%, induced by newly renovated room supply.  Average daily rate recorded marginal growth at 2.2% to JPY 21,469.  As a result, revenue per available room (RevPAR) reached JPY16,295, an increase of 4.2% over 2001. 

In 2003, the effect of severe acute respiratory syndrome (SARS) has so far been limited to Tokyo where inbound corporate is a major demand segment.  �Although the war in Iraq and SARS have caused inbound arrivals to decline in the short term, it will not be of significance in the long term.  I expect international arrivals will rebound and resume growth once the SARS situation has stabilised� said Mr Sawayanagi. 

In the interim, the gap will be offset to certain extent by increased domestic demand as Japanese substitute international holiday plans with local destinations.  The marketing of newly opened hotels is also expected to stimulate domestic demand growth.

According to the Digest, over 3,000 rooms are expected to enter the Tokyo hotel market within the first class and luxury sector between 2003 and 2008.  �The positive combination of new hotel product and prime CBD locations is expected to boost overall ADR in the Tokyo CBD area.  Older hotel product will be under increased competition to achieve future ADR projections� said Mr Sawayanagi.

Conversely, the major hotel market of Osaka is unlikely to witness any new luxury supply in the near future due to the prolonged local economic downturn and the reluctance of local developers to undertake large scale projects.  The one exception to this is Swissotel�s conversion of Nankai South Tower Hotel.

The demand boom Osaka experienced with the opening of Universal Studios Japan (USJ) in 2001 settled in 2002, leading to a 10.1% decline in occupancy in the first and luxury hotel sector.  This, coupled with a moderate decline in ADR led to an 8.4% fall in RevPAR to JPY12,626. 

In an effort to boost future visitor numbers, USJ opened a new attraction in April and will undertake marketing strategies to tap into new markets such as the weddings segment.

Goa star performer of the India�s hotel markets

Goa�s hotel market was boosted to the position of star performer in India for 2002 thanks to a recovery in demand from international and domestic visitors during the fourth quarter. 

Increased demand boosted occupancies within Goa�s five star deluxe and five star sectors by 20.9% and 15.9% respectively to 57.9% and 59.9%.  Although these results came at the cost of average daily rate (ADR), particularly in the five star sector, revenue per available room (RevPAR) recorded growth of 18.8% and 0.3% to record INR2,541 and INR1,078.
 

Goa�s tourism market witnessed a remarkable recovery in visitors from the United Kingdom, Germany and Switzerland, as well as chartered flight arrivals from the previously untapped markets of Russia and the Middle East during the December quarter of 2002. 

According to Mr Scott Hetherington, Managing Director, Jones Lang LaSalle Hotels �Throughout India, a revival of international arrivals (17.7%) was recorded in fourth quarter of 2002 compared to the same previous period.  Traditionally the country�s peak period, hotel markets suffered during December quarter 2001 due to the drop in international demand following September 11.� 

The results are an encouraging end to a year in which India�s tourism market was adversely affected by its perceived proximity to Afghanistan, the possibility of military conflict between India and Pakistan and the related travel advisories issued by key source markets between April and August. 

An overall decline in economic growth also impacted domestic corporate hotel demand, particularly in the markets of Delhi and Chennai.  The growth of the Information Technology (IT) sector was the exception to the rule, improving hotel demand in Bangalore, India�s IT hub, towards the end of the year.  Given the expectation for strong growth in this sector, this trend is likely to continue.

Anecdotal evidence suggests performance during first quarter 2003 was positive as demand picked up in Dehli, Chennai and Bangalore.  However, the war in Iraq and SARS have had their effect on hotel occupancy during April.  �As April is the commencement of the off season for international tourists, the hotels are somewhat cushioned from a decline in inbound arrivals.  Performance will also be buoyed by a solid domestic market, albeit lower yielding than the inbound sector� said Mr Yeshwant Nadkarni, Associate, Jones Lang LaSalle Hotels.

Hotel trading performance in Chennai and Bangalore will also benefit from limited new supply entering these markets over the short to medium term. 

�Mumbai is the only market expected to see supply growth over the short term with an estimated 1,368 rooms coming on line in 2003 and 2004.  As a result, hotel trading performance is expected to be under downward pressure over the next couple of years� said Mr Nadkarni.

A planned upgrade of Goa�s international airport, to include a capacity increase, is likely to boost international arrivals in the medium term.  In the long term, the development of an international airport to service Bangalore is expected to stimulate increased international demand upon its completion by 2006. 

The Asia Digest reports India witnessed an active domestic hotel investment market during 2002 with nine properties totalling 2,288 rooms changing hands.  The transactions were a result of a disinvestment programme spearheaded by the Indian government, with the exception of the Regent Mumbai.  The majority of purchasers were domestic owner operators and property investors.

�We do not envisage this level of activity to continue in 2003, given that the majority of government owned hotels were sold during 2002.  Hotel owners are more likely to hold on to these assets, positioning themselves to reap the benefits of an upturn� said Mr Hetherington.

Jones Lang LaSalle Hotels� Digest Asia 2003 Edition provides the latest analysis for 22 major hotel markets spread over 12 countries.  It also features an economic report card, tourism market examination and future supply tables.