Singapore, 3 April, 2017 – According to a new report from Colliers International (NASDAQ: CIGI; TSX: CIGI), a global leader in commercial real estate services, intra-regional and increasingly more domestic travel will dominate the market in 2017, leading to investment in a wider range of Asian destinations. The first quarterly
Colliers International Hotels Insight Report
features major trends in destinations across Asia and highlights of key industry disruptors.
David Faulkner, Managing Director of Valuation and Advisory Services for Colliers International Asia, commented on the report: “Intra-regional and domestic tourism continues to drive growth in the hospitality sector in Asia Pacific. This is evidenced by the fact that, of the top 10 source markets for travel in Asia, 7 are from within the region. Additionally, with increasingly favourable conditions in emerging markets across the region, such as ASEAN, these destinations are expected to continue to attract strong growth and provide the best opportunities for investors.”
Tourism arrivals to the Asia Pacific region were forecast to grow by 9% in 2016, continuing a steady period of growth witnessed since 2010. China’s continuing influence in the region will evolve in two ways: its outbound tourism impact slowing as China adjusts to new growth levels as it matures; and greater domestic travel within China as the government curbs conspicuous spending with capital controls whilst the yuan also remains relatively weak against the dollar. This ‘staycation’ effect is expected across a number of markets where the currency is relatively weak, and is already being witnessed in Japan, Malaysia and Indonesia.
Govinda Singh, Director of Valuations and Advisory Services for Colliers International Asia, added: “We are generally optimistic about the growth outlook for the hotel sector across Asia, with emerging markets providing the best investment opportunities. We expect growth to be positively impacted by the continuing evolution of low cost carriers and the destinations they serve, together with economic performance and consumer confidence in key source markets. The outlook for mature destinations isn’t as positive, with growth likely to remain low or even negative as markets peak and new supply enters the market. This will place pressure on room rates in the short term in particular as the new supply is absorbed, with owners paying more attention to who their operator is, or should be, in an effort to mitigate this.”
In mature destinations, mid-market and lower segments represent good value for money investment opportunities. An outlook for four developed markets follows:
Tourism arrivals in Singapore are expected to grow following a relatively stagnant performance in recent years. In 2016, visitor arrivals were predicted to grow by around 7% with a further 2% forecast for 2017. This is a robust performance and is mostly underpinned by an increase in visitation from North Asia, in particular China. Furthermore, Singapore hotels, and especially hospitality REITs, have consistently outperformed other mainstream real estate assets.
Tokyo has witnessed exponential growth in visitor arrivals since 2015 as the impact of low cost carriers and easing of visa restrictions, together with the weak yen, drove visitation in record numbers. Combined with the staycation effect, as it is more expensive for Japanese to travel overseas due to the weaker currency, hoteliers have enjoyed record room occupancies. This has led to a renewed interest in the hotel sector as an alternative asset class for investment.
Thailand continues to demonstrate its remarkable ability to bounce back from recent events. Phuket has witnessed exponential growth in tourist arrivals since the relaxing of visa rules and the increase in low cost carriers and destinations served since 2012. Furthermore, The market is beginning to show signs of de-coupling from Bangkok, underpinning investor confidence. However, visitation to the destination will depend on the economic outlook for China and Russia, especially given the weakening of the rouble.
The hotel market in China has witnessed exponential growth in recent years and has rapidly evolved to become more sophisticated, especially as local owners secure investments in international operators. Initially, growth was concentrated in the major mega-city locations such as Beijing, Shanghai and Guangzhou. Growth has now spread to key primary and secondary cities including Shenzhen and Chengdu, with focus turning to the international upscale and below segments as investment in the sector becomes more sophisticated, which will offer good return on investment.
Baron Ah Moo, Head of Hotels for Capital Markets and Investment Services for Collers International Asia, commented: “In terms of investment, we expect 2017 to remain buoyant but turbulent, with short-term decisions continuing to cloud longer-term outlooks in the first half of the year. Furthermore, US interest rate policy will continue to influence currency movements across the region. In the latter part of the year, the reward for investing outweigh the risk of standing still, thus bold investors will continue to drive decision making as they seek higher returns on capital.”
To read the full report, please click here.
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