JLL's M&A head talks APAC direction, consolidation and the ASEAN Economic Community

It's been an active year for M&A activity in the Asia Pacific hotel space, and 2016 is likely to be as busy. One of the big developments will be the launch of the ASEAN Economic Community at year-end, which will create a common market with 600 million people and a combined GDP of more than $2.4 trillion.

Also in for a busy year is Tony Ryan, an industry veteran with three decades of experience, who, starting in December, will serve as JLL Hotels & Hospitality Group’s global head of mergers and acquisitions. Based in Singapore, this newly created position will see Ryan providing hospitality industry clients with strategic advice on expanding their business through corporate and portfolio acquisitions, capital sourcing, JVs, restructuring and cross-border transactions.

Hotel Management spoke with Ryan to learn more about what he sees in Asia Pacific today, and where it’s headed:

HM: What do you consider to be the major factors influencing the current M&A environment for Asia Pacific hotels at the moment? 

Ryan: M&A activity is likely to occur in relation to management companies, hotel asset portfolios and a range of other hospitality related businesses. One of the driving factors is the impending consolidation of management companies. Many international operators want to grow their exposure to Asia and we see significant potential in the region.

Another factor is the weight of capital and the scale of transactions. There is a significant group of global investors who have an increasing appetite for large-scale complex cross border transactions. The third factor is the growth of hotel real estate investment trust (REIT) structures and legislation across Asia. The success of hotel REIT's in Singapore and Hong Kong demonstrate an appetite for these types of investments.  

HM: Which countries or regions in Asia Pacific do you see attracting the most hotel M&A activity in the coming 12 months?

Ryan: In relation to management companies, I see significant interest in Indonesia, Thailand, China and India. Some management companies are looking to get in on the ground floor for the emerging markets of Indochina. 

HM: How do you see China- and Hong Kong-based brands and investors approaching Asia Pacific acquisitions in the coming 12 months? Are current economic trends in China likely to lead to more conservative investment, will moving capital abroad grow in appeal, or do you see other dynamics coming into play?

Ryan: Over the last two or three years, Hong Kong and China brands and investors have been particularly active. We have noticed that the size of the transactions has increased, showing a greater confidence. A more recent feature has been transactions where the global impacts of technology, distribution and loyalty programs have become fundamental drivers of the deal.

HM: The ASEAN Economic Community will launch at the end of this year. How much do you see this influencing hotel M&A activity within ASEAN?

Ryan: For nearly of all the ASEAN countries, the tourism and hospitality industries are among the top three or four economic sectors that will drive economic growth and prosperity for their citizens. This is well understood and embraced by the governments of these countries. We expect M&A activity to grow as these markets mature and show real sustainability. 

HM: What factors do you see shaping Asia Pacific hotel M&A activity in the coming 12 months?

Ryan: The Asia Pacific market will be affected by a number of factors, such as an increase in interest rates in the U.S., moderating growth for the Chinese economy, disruptive technologies and their impacts on marketing and distributions, the efficiencies of global platforms in delivering guests and profitability and the potential for greater investment yields than achieved in the more traditional markets.