ShanghaiJune 25, 2026 /PRNewswire/ — As China’s public REITs further expand their underlying asset types to include hotels, hotel asset securitization is entering a critical phase of accelerated development. Seizing this key window of opportunity, Jones Lang LaSalle (JLL), in collaboration with Zhong Lun Law Firm, has jointly released the white paper “China Hotel REITs Market Development: Opportunities, Challenges, and Practical Pathways” (hereinafter referred to as the “White Paper”), aiming to provide decision-making references for hotel owners, investment institutions, and relevant market participants.
Zhou Tao, Managing Director of JLL Hotels & Hospitality Group, Greater China, stated: “As a real estate investment tool, REITs represent a profound transformation centered on asset management capabilities for the hotel industry. Looking ahead, hotel REITs will further drive the revitalization of existing assets, optimize capital structures, and enhance operational efficiency within the industry. They will offer investors more diversified allocation options and inject new momentum into China’s hotel sector as it moves towards a more professional, transparent, and sustainable stage of development.”
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Typical Structure of Hotel REIT Issuance
As of May 31, 2026, all submitted hotel REIT projects are classified as commercial real estate REITs. These products have no special requirements regarding the positioning or location of the underlying hotel assets. They only need to meet the basic conditions uniformly applied to other types of commercial real estate (such as retail properties and office buildings) for REIT issuance, including stable operations, a minimum operational track record of three years in principle, good investment returns, and compliance with regulatory standards. In principle, they can be submitted for application. Currently, public REITs in the market generally adopt a dual-layer structure of “public fund + asset-backed special plan.”
Cash Flow Quality is the Core of Hotel REIT Value
The White Paper emphasizes that, as a typical operation-driven asset, the core value of a hotel lies not merely in the property itself but, more importantly, in its ability to generate sustainable net operating income (NOI) in the future. Therefore, the Discounted Cash Flow (DCF) method is the primary approach for hotel asset valuation. Compared to traditional real estate, hotel valuation places greater emphasis on long-term holding returns and dividend capacity, with particular focus on the authenticity, stability, and sustainability of cash flows.
In the valuation process, the White Paper proposes strict prudence principles:
- Establish DCF as the Sole Dominant Method: All hotel underlying assets submitted for public REITs must be valued based on future stable net cash flows, with an appropriate discount rate set considering project location risks, operational model risks, and industry cycle risks.
- Three Hard Rules for NOI Calculation: Exclude all non-recurring abnormal income; fully and regularly provision for routine capital expenditures (at 3%-5% of annual operating revenue); strictly segregate medium- to long-term major renovation and upgrade expenditures.
- Clearly Prohibit Optimistic Improvement Assumptions: No assumptions for management optimization; no assumptions for lease and operational term optimization; no assumptions for business format transformation or operational model upgrades; no neglect of long-term implicit value depreciation factors.
“In valuation, the operational model and city tier must be incorporated into the same risk coordinate system. Taking projects managed by top international brands under full entrustment as an example, relying on mature standardized controls, their cash flow resilience against volatility is strongest in first-tier and new first-tier cities, warranting a relatively lower discount rate. However, if the same model is applied to second-tier cities, or switched to franchising or self-operation, risk parameters need to be adjusted upward in a stepwise manner, achieving a positive match between risk and valuation parameters,” noted Han Jing, Senior Director of JLL Valuation Advisory.
Legal and Compliance Synergies Driving Hotel REIT Implementation
Compared to other types of commercial real estate, hotel assets have longer operational chains and involve more participants, imposing higher standards for legal due diligence and compliance management. The White Paper points out that the clarity of underlying asset ownership, the completeness of construction and operational permits, and the ability to maintain sustained and stable operations are key concerns for regulators and market participants.
Furthermore, the issuance of hotel REITs is often accompanied by the optimization and restructuring of operational management frameworks. Reasonably clarifying the rights and responsibilities among property owners, operational management agencies, and brand management entities while meeting REIT regulatory requirements is a crucial prerequisite for the smooth progress of projects. As the first batch of projects is expected to be listed for trading soon, franchise models, operational support, and other cooperation models more aligned with REIT regulatory logic are opening new pathways for the securitization and professional operation of hotel assets.
Ji Chao, Equity Partner at Zhong Lun Law Firm, stated: “The value of lawyers lies not only in legal due diligence and compliance review during the issuance phase but also in helping all parties establish executable transaction structures and operational arrangements. Hotel REIT projects encompass multiple attributes, including real estate, capital markets, and hotel operations. This requires legal teams to effectively bridge regulatory requirements and commercial interests, providing support for the smooth submission, registration, and subsequent stable operation of the projects.”
Learning from Global Experience, Exploring China’s Path
It is noteworthy that the long-term healthy development of China’s domestic hotel REITs market depends not only on the establishment of a continuous expansion mechanism but also on the accumulation of high-quality asset reserves. This imposes stricter requirements and challenges on the original equity holders in terms of asset management and capital operation expertise.
The White Paper, drawing on classic hotel REIT merger and acquisition cases from the United States and Japan, distills the experiences of mature markets in asset selection, capital operation, value enhancement, and risk management. Based on the development patterns observed in overseas markets, the White Paper identifies five major trends for China’s hotel REITs: continuous diversification of asset types, further market differentiation, enhanced professional asset management capabilities, the sustained dominant role of institutional investors, and increasingly active direct investment channels.
About Submitted Projects
As of June 24, 2026, four hotel public REIT projects have been submitted, with one having received approval for registration from the China Securities Regulatory Commission. These projects cover urban business limited-service hotels, standardized mid-range hotels, high-end cultural tourism resort complexes, and full-service hotels, initially establishing a multi-format, multi-model, multi-location underlying asset landscape for hotel REITs. The White Paper points out that with the official launch of the first batch of hotel REITs, China’s hotel industry is at a critical inflection point, transitioning from a “heavy asset” model to a “separation of heavy and light assets” model, marking a new development phase where asset securitization and operational specialization go hand in hand.
About Jones Lang LaSalle
Jones Lang LaSalle (NYSE: JLL) is a leading global commercial real estate services and investment management firm. The company reported revenue of $26.1 billion in fiscal year 2025, operates in over 80 countries worldwide, and employs more than 113,000 people. As a Fortune 500 company with over 200 years of professional expertise, we continue to earn the trust of global clients, helping them efficiently acquire, develop, occupy, operate, and invest in diverse asset types, including office buildings, industrial logistics, hotels, rental apartments, retail properties, and data centers. Guided by our purpose, “Shaping the future of real estate for a better world,” we work with clients, employees, and communities to “do the right thing.” Leveraging world-leading data insights and technological innovation, we provide clients across various industries with comprehensive, full-cycle real estate services. Through our investment management arm, LaSalle Investment Management, we invest in private real estate assets and publicly traded real estate securities globally, helping clients achieve long-term value growth. For more information, please visit joneslanglasalle.com.cn