As far as discretionary spending goes, holidays are one of the last things that people will give up on, and it is increasingly being seen as a must have. Despite geo-political risks, particularly in Northeast Asia, the tourism sector in Asia Pacific once again witnessed significant growth last year. Asia Pacific will continue to be a powerhouse for tourism growth, after booking a 5.6% year-on-year increase in international arrivals at 321 million in 2017.
The hospitality industry has been a key beneficiary of a more stable global economy in recent years. According to the Colliers Hotel Insight report, visitor arrivals to the region is expected to rise by another 4.5% in 2018, owing to continued consumer confidence, further increase in low cost air travel, and availability of better quality room stock, especially in emerging destinations.
Infrastructure enhancements across the region, such as the recent opening of the Changi Terminal 4 in Singapore and the completion of Phase I of Jakarta’s Soekarno-Hatta Airport, will also support tourism growth.
According to Colliers’ forecast
, Revenue Per Available Room (RevPAR) for Asia Pacific is projected to rise by 3% in 2018. Meanwhile, Average Daily Rate (ADR) growth this year is expected to be led by Korea with an estimated 6-8% increase (bouncing back from the fall-out with China), followed by Japan at 3-5%. Several Asian destinations, including China, India, Malaysia, Singapore and Thailand, could see ADR growth of between 1-3%.
Although prospects remain bright in the hotel sector, several themes warrant a closer look. They include geo-political risks, foreign exchange risk, absorption of new hotel stock and a potential slowdown in investment due to limited top-notch acquisition opportunities.
China remains one of the main sources for hotel investment across Asia in 2017. On a year-on-year basis, hotel transaction volume rose by more than 10%, mainly underpinned by Dalian Wanda’s transfer of its China assets to a related party.
Despite capital controls, preliminary data from Real Capital Analytics showed that total Chinese investment in foreign property assets increased slightly in 2017 from 2016, both including and excluding land development sites. Real estate remains the preferred vehicle for mainland buyers, with hotel investments being a preferred alternative asset class.
However, quality hotel inventory remains scarce and investors are expected to contest keenly for competitively priced assets with strong cash flow and recurring income, such as the portfolio of seven internationally-branded hotels in Thailand which has been put on the market last month (Jan 2018).
Several trends that are expected to drive the hotel sector in 2018, will include:
- Foreign currency movements
- Consumer confidence
- Health and Wellness
- Smaller rooms/capsule hotels and co-living
- The return of value for loyalty as a tool to manage OTAs (online travel agencies)
Colliers expects Bangkok, Singapore, Hong Kong, Tokyo, Kuala Lumpur and Taipei to remain the leading Asian destinations of choice this year.