HK family offices ramp up hospitality bets in Asia, Europe
Two single family offices in Hong Kong are diversifying their real estate investments into hospitality across Asia Pacific and Southern Europe as post-pandemic international travel demand continues to surge.
They see investment opportunities in hotels in Thailand, Cambodia, Spain, and France, which is set to benefit from the Paris Summer Olympics in 2024.
“Real estate is definitely still on the radar but traditionally we are a bit more into residential and commercial. Now we may be focusing more on hospitality,” said Timothy Tsui, chief investment officer of Arbutus, a Hong Kong-based single family office. Tsui manages the firm for his family wealth.
“We still believe strongly in real estate in Europe. We see a lot of opportunities within the hospitality space, particularly in France and Spain. I think there's a lot of opportunity with cheaper euro and also a large amount of tourists and revenge travel going into places like Paris and Madrid,” Tsui told a panel discussion at AsianInvestor’s Family Office Briefing Hong Kong on Wednesday, November 28.
This is driven by tourists from the US, Middle East, Asia Pacific, and other parts of Europe, he noted.
In particular, he’s looking at boutique hotels in France and Spain - which are among the most popular travel destinations globally - ranging from four to six-star, depending on cities, market competition, and where they see a gap in supply.
With Paris hosting the Summer Olympics next year, he expects a large boost to tourism in France.
He prefers working with local family offices, construction companies, and other partners to source deals, manage projects, and deal with regulatory and administrative matters in the form of co-investment or partnership.
Meanwhile, Tsui is also working with a fund focusing on developing four or four- and half-star hotels with yoga retreats in Southeast Asia.
“We've seen this big trend of customers looking for wellness retreats. It's an interesting dynamic where we see some customers spending five weeks straight attending yoga teacher training. This is quite rare in the hospitality sector, with very sticky customers and high occupancy rates,” he said, adding that key customers are from Europe.
Noting that Thailand has been a big beneficiary since opening up post-Covid, Tsui said he plans to expand into other parts of Thailand, such as Phuket. Indonesia and other Asia-Pacific destinations are also on his radar.
CHASING CAPITAL
Also looking at real estate investments, Ong Iu-Jin, co-founder and managing partner of single family office Augventive Limited, plans to start exploring the hospitality sector in emerging markets again across Asia, such as Cambodia, over the next year.
Meanwhile, Ong might selectively start building positions in Greater China real estate - including Hong Kong - next year as part of a contrarian investing strategy. But he is still weighing on how to take such exposure.
Also speaking at the panel discussion, Ong said the family office will start from small positions in single-family homes through acquisitions, which is a market that the family understands and believes will have upside in the long term.
According to a CBRE report published in October, institutional investors are attracted to prime hotel assets in top tier markets across Asia Pacific, even though tourist arrivals in key destinations are only reaching 70-80% of pre-pandemic levels.
Ong is also following the capital flow to invest in Singapore properties. One of the transactions he is doing is co-investing with another single family office through a joint venture, through which Ong’s family office will own a minority stake in a prime property asset to redevelop and add value.
“We are bullish simply because of [Singapore’s] position as a safe haven in the current geopolitical environment. I don't see that changing for the time being,” Ong said.
The latest CBRE report showed that in the past 18 months, institutional investors within and outside Asia Pacific have exerted more effort to secure prime hotel assets in top tier markets in the region, with repricing of hotel assets being held up by income growth potential compared to other asset classes.
Despite a higher-for-longer rate expectation, institutional demand will remain solid due to hotels’ cyclical uptick and inflation hedge nature, with core assets in Japan, Singapore, Australia, Korea, and resort markets already gaining interest, the report wrote.