According to the Q2 Hotels Insights report
from Colliers International, a global leader in commercial real estate services, China remains one of the main source markets for hotel investment across Asia, despite the restriction in offshore capital flows. Overall, the outlook for the hotel sector across Asia remains cautiously optimistic, especially as intra-regional growth in visitation continues, and supply pipelines mature.
Govinda Singh, Director of Valuations and Advisory Services for Colliers International Asia, commented: “We are seeing decreased levels of landmark merger and acquisitions in the region, primarily because Mainland players have been unable to move significant amounts of funds around. Supply growth, paired with a general slowdown in domestic and international consumption, has also weighed on performance, as disposable income remained tight across the region. However, real estate investment only saw a relatively moderate decline and remains a core investment for most Chinese investors.”
Globally, the hotel sector was not immune to a drop in transaction activity; however, the core “safe haven” markets show no signs of slowing down in Asia. Singapore, Tokyo and Hong Kong assets continue to trade at compressed cap rates and record pricing despite a softening in demand and additional supply. Furthermore, geo-political tensions have led Asian real estate investors to continue to refocus on regional investments, while global interest in trophy and opportunistic acquisitions continues. Ultimately, the hotel sector is stable across Asia and the outlook remains cautiously optimistic
In this second installment in the Asia Hotels Insights series, we take a look at Hong Kong, Bangkok and Guam. We also feature articles comparing average daily rates across markets and the increasing proliferation of hotels in driving additional spend at theme parks.
The hospitality sector in Hong Kong has rebounded with an unprecedented nine hotels sold within the last six months. Hong Kong remains attractive, especially to a large Chinese market, and growth has been closely linked to the Mainland over the last five years as the destination increased its leisure attractions and the airport expansion plans continue to strengthen its status as a regional hub.
While recent economic growth has been strong in both the Mainland and Hong Kong, as the market continues to mature, and given its exposure to a potential downturn in China and currency movements in key source markets, it is likely to be lower in the medium to long term of 3-5 years. Looking forward, the outlook for visitation to Hong Kong remains cautiously optimistic, and investors are showing confidence in future hotel developments, particularly in decentralised areas.
While growth in Thailand has been sluggish over the last five years as political events weighed on performance, the market saw a moderate uptick in Q2, with tourism remaining the main growth driver in the country. Bangkok has witnessed exponential growth in tourist arrivals after relaxing its visa rules and the increase in low cost carriers and destinations served since 2012. Between 2011 and 2015, tourist arrivals grew by a CAGR of 7.2%, with overnight travelers increasing by 15% alone between 2014 and 2015, as the destination recovered from the political fallout of 2014.
Bangkok’s increasing attraction, the growing Chinese market and medical tourism sectors have all contributed to this result. In addition, direct flights from new destinations such as Russia, the Middle East and China have increased significantly. As such, whilst the outlook for tourism visitation to Bangkok remains positive, much will depend on wider economic issues and geo-political events. But as the destination has shown time and again in the past, it can recover quickly from any event.
Guam has witnessed strong growth in tourist arrivals since visa rules were relaxed and direct flights to the country increased from major source market destinations including Taiwan, South Korea and Russia. Between 2011 and 2015, tourist arrivals grew by a CAGR of 3.6%, with overnight travelers expected to increase by 9% between 2015 and 2016, in line with its target to attract approximately 2 million overnight visitors by 2020.
As such, whilst the outlook for tourism visitation to Guam remains cautiously optimistic, much will depend on the economic performance of its key source markets, airlift, and infrastructure development including new hotel supply.
To see our Q1 installment of the Asia Hotels Insights series featuring Singapore, Tokyo, Thailand and China, please click here.