Hotel investment in Asia Pacific reached US$8 billion in the first half of 2026, up 21% year over year, as Japan, Mainland China and Korea absorbed most of the region's transaction activity, according to CBRE's Asia Pacific Hotels and Hospitality Performance and Outlook Report.

The gain came despite elevated borrowing costs. CBRE attributed the increase to recovering travel demand, room rates at or near historical highs, and a development pipeline that remains constrained across most markets — conditions that sellers of travel and asset managers alike can read as a repricing of existing hotel stock rather than a wave of new capacity.

What drove the transactions?

Mainland China delivered one of the region's sharpest turnarounds: hotel transaction volume more than doubled year over year. A key catalyst was policy. The extension of China Real Estate Investment Trust eligibility to hotel assets rated four stars and above expanded financing and exit options for qualifying properties, widening the pool of buyers and structured capital available to owners.

Japan continued to attract both domestic buyers and cross-border capital. Korea drew investment on the back of operating performance and international visitor demand. CBRE said investors concentrated on markets where travel growth and supply-demand dynamics were supportive.

Rates, not occupancy, are carrying revenue

Operating conditions improved across most of Asia Pacific in the first half of 2026. Average daily rates sat at or close to historical highs in most markets, and RevPAR kept rising — driven almost entirely by rate rather than volume.

Occupancy in much of the region still trailed pre-pandemic levels. Operators have largely chosen rate discipline over chasing occupancy, a strategy that has protected revenue even where occupied-room counts have not fully recovered. Two markets stand apart: Korea and Vietnam both exceeded pre-pandemic occupancy levels, signaling demand recoveries at different speeds across the region.

Tourism flows held up despite disruption to some long-haul routes linked to the Middle East conflict. Korea broadened its visitor base through K-pop, Korean film and television, and medical tourism. Vietnam strengthened its position as a leisure destination, supported by arrivals from within Asia Pacific and Europe.

How tight is the supply pipeline?

Very. Excluding Mainland China, CBRE projects Asia Pacific hotel supply growth of roughly 1% annually between 2025 and 2029. Elevated construction and financing costs have restricted development across many locations.

Mainland China is the outlier: it accounts for nearly half of projected new hotel additions and is expected to remain the region's largest source of future supply. That split points to diverging competitive conditions — incumbent assets in low-supply markets face minimal new-build competition, while Chinese owners confront a denser pipeline.

Where is the capital going next?

With ground-up development harder to justify, investors are turning to existing assets for repositioning, renovation and conversion. The trend is most visible in Hong Kong SAR, where some hotels are being acquired for conversion into student accommodation and other living-sector uses — a sign that alternative-use valuations now compete with hotel valuations for the same buildings.

CBRE said constrained supply, sustained travel demand and improved operating results continue to support the investment case for existing hotel assets. The report's caveat matters for anyone underwriting second-half deals: higher financing costs could slow transaction volumes in H2 2026, even as investor appetite stays focused on markets with favorable growth conditions.

The numbers to watch into year-end are whether China's post-C-REIT momentum sustains its doubling pace, and whether Korea and Vietnam can keep converting occupancy outperformance into further asset-value gains.