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Hotel sector recovery will be U-shaped and varied across the region; Hong Kong SAR recovery to be slower due to limited domestic supply

  • Hotels across Asia Pacific continued to experience poor performance in Q2, with overall room occupancy and average daily rate (ADR) showing decreases to 33.9% and US$60.32, respectively
  • Revenue Per Available Room (RevPAR) for the region declined by some 69.9% year-on-year
  • In terms of room occupancy, most markets (except for China, Myanmar, The Philippines, Singapore and South Korea) witnessed year-on-year declines in excess of 40.0%
  • Hong Kong, Japan, Thailand and Vietnam led the field in being the top five lowest performers
  • Hong Kong SAR market recovery to remain slow until borders are re-opened and given the small domestic travel market

Hong Kong, 20 August 2020Colliers International (NASDAQ: CIGI; TSX: CIGI), a global leader in commercial real estate services, today released the Hotel Insights Q3 2020 report, a quarterly digest of key trends in the hospitality sector.

Govinda Singh, Executive Director and Head of Hotels & Leisure for Valuation & Advisory Services, Asia, commented: “The global economic outlook is expected to remain subdued in the near term given the ongoing uncertainty and risks of new waves of COVID-19. Therefore, the outlook for the hospitality industry in the region is expected to be dimmed in the near term. Nonetheless, we believe the hospitality industry will rebound when travel returns given its legacy of resilience and agility. To prepare for hotels re-opening, hoteliers will need to take a cross-disciplinary approach so that hotels are well-positioned to build public trust and offer compelling product and service offerings, enabling hotels to thrive in the new operating environment with an evolving customer mix and preferences.'

Shaman Chellaram, Senior Director, Capital Markets and Investment Services, Hong Kong SAR said: “For Hong Kong, the first part of recovery depends on when its safe enough to open the border to China as containment of COVID-19 is still in progress. The closure has significantly reduced inbound visitors with Hong Kong having a limited market for domestic travel. This means market recovery will remain slow until essentially the connection with China is re-established. The city is also reliant on international travel demand, which is another area that could solidify recovery especially if there is an establishment of a travel bubble network. From an investment perspective, the current stress (not distress) in the market may present investors with an opportunity in near-term.'

Investor interest in the industry remains firm

The most liquid markets in Q2 were Japan and South Korea while markets such as Hong Kong SAR, China and Taiwan saw little investment sales during the quarter. With international travel restrictions in place, domestic investors remain the dominant group in investment transactions. In the coming months, investment activity is expected to gain pace as investors move to take advantage of any opportunities that will emerge, although cautious sentiment and stricter underwriting remain key given the evolving situation. For value-add investors and those looking to create a presence in the regions key city and resort markets, this may be the right time to explore. With access to mainstream financing likely to be limited in the near term, cashed-up investors who can transact quickly will be in prime position.

Health and safety to be a key consideration in travel planning going forward

As markets start to recover, consumers will prioritise health, safety and hygiene when it comes to travel planning and decision making. Personal space will also be more important; instead of large tour groups, independent travel will take precedence and people will likely prefer bespoke holidays and seek out travel experiences with a purpose (such as health and wellness, eco-travel, etc.). Technology will also take on a more critical role in the traveller ecosystem and be a key tool in the revival of travel. Robots, chatbots, automation, recognition technology, artificial intelligence (AI), internet of things (IoT) and virtual reality (VR) will become increasingly commonplace.

Weekend leisure segment to recover first, driven by pent-up demand for travel

Across Asia, domestic travel will return first while international travel, particularly if it involves air travel, will take a longer time to recover. The weekend leisure segment is expected to lead the recovery, driven by the pent-up demand for travel as international travel restrictions and quarantine measures remain largely in place globally. Underpinned primarily by essential business travel, the corporate travel segment should be next to return, followed by the extended leisure segment, as consumers confidence increases over time alongside the lifting of international travel restrictions. Meetings, incentives, conferences and exhibitions (MICE) and group segments will likely be last to recover given the high adoption of technology as an effective platform for MICE activities.

Click here to download the Hotel Insights Q3 2020 report.

Related Experts

Shaman Chellaram

Senior Director | Asia

Valuation & Advisory Services

Hong Kong

As Senior Director Valuation & Advisory Services Asia at Colliers, I leverage my 18-years of strategic and investment advisory experience to work closely with my clients to maximize the potential of their hotel and commercial real estate assets in Hong Kong and across key regional and international markets.  This includes acquitistion and disposal advisory,  asset repositioning,  market entry, portfolio diversification, operator selection, hotel and mixed-used development, hotel tokenisation, ESG, transaction advisory and M&A.   

Advising from both an operational and investment perspective,  my clients include hotel and resort investors, hotel operators, serviced apartment groups, co-living groups, developers, PERE funds, REITs, family offices,  private investment groups and UHNWIs. 

By understanding my clients' needs, I draw on our Colliers global platform and capaibilities to provide solutions and accelerate our clients' success, whether in Hong Kong or overseas.   

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Pureanae Jang

Senior Associate Director

Valuation & Advisory Services

Hong Kong

Pureanae Jang works as an Associate Director of Colliers' Valuation and Advisory Services in Hong Kong. Pureanae manages a team of eight, and her projects' geographic coverage spans across Asia Pacific, in particular Hong Kong, China and South Korea. She is commited to provide accurate and well-supported opinions of property value to assist her clients to reach their critical goal - to acquire the best asset, secure financing, close a sale, report to investors or identify unlocked potential of an asset.

Her specialisations include:

• Single-asset and Portfolio Valuations

• Appraisal Review / Management

• Discounted Cash Flow Analysis

• Feasibility Studies

• Highest and Best Use Studies

Having grown up in Mainland China and Hong Kong, Pureanae can speak, read and write in English, Japanese, Korean and Chinese. With her diverse background and effective cross-cultural communication skills, she is capable of delivering portfolio valuations on a global scale. She has completed various projects in Australia, Hong Kong, Indonesia, Japan, Korea, Mainland China, Mongolia, Northern Mariana Islands, Singapore, Taiwan and The United States.

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