Colliers experts anticipate a cautious return to travel underpinned by a rebound in domestic demand; rapid recovery expected upon successful rollout of mass vaccinations.
- Any return to travel will ultimately depend on the successful rollout of mass vaccinations and possibly a rapid testing protocol in the US, Europe and China
- Sydney remains attractive to investors in the near term as domestic tourists return
- Japan hotels still appealing to investors as outlook remains positive; pricing should stay firm in the medium term, after retreating slightly during COVID-19
- The cruise sector has been one of the fastest recovering sectors, owing to its adaptiveness in tapping into significant pent-up demand for travel
- Transactions remain at historically low levels as owners are able to hold rather than being forced to sell assets at a discount, a stark contrast to the fallout from the global financial crisis
SINGAPORE, 1 June 2021 – Leading diversified professional services and investment management company Colliers today released the Hotel Insights | Q2 2021 report, a quarterly digest of key trends in the Asia Pacific hospitality sector.
Govinda Singh, Executive Director, Head of Hotels & Leisure, Asia, commented: “The global economic outlook continues to improve, with a cautious return to travel underpinned by a rebound in domestic demand, as witnessed in the US, UK and China. As the vaccination rollout gathers pace and more green lanes or corridors open, we expect a rapid recovery led by pent-up leisure demand, followed by business. Hotels across Asia Pacific should continue to attract capital as the hunt for yield continues. Yields, whilst relatively low currently, reflect capital values growth outpacing income, but this will increase to historic levels as performance improves. ”
“For those looking to invest, depending on motivation, most gateway and regional cities across Asia Pacific continue to be attractive.”
Increasing interstate travel should improve Sydney hotel performance
In 2019, hotels in Sydney achieved year-round occupancy levels of 85.4%. In 2020, however, full-year occupancy levels were significantly down at a historic low of 43%, compared to the same period in 2019, as the restrictions on travel due to COVID-19 were realised. Demand for hotels in 2020 was predominantly from those undertaking the mandatory quarantine period in hotels and a small proportion of intrastate leisure demand.
In the month of March 2021, Sydney hotels recorded a higher occupancy compared to March 2020, where occupancy levels were 48.8%, compared to 47% in March 2020. This may signal that the market is starting to recover.
Gus Moors, Head of Hotels, Hotel Transaction Services, Australia, commented: “The current demand for hotel is predominated by guests serving their mandatory quarantine period and a small proportion of instrastate leisure demand. Recent hotel performance figures for March 2021 do show some improvement, and as interstate travel builds, this performance is anticipated to improve over the course of the year. With more people getting vaccinated and travel restrictions ease, travel demand from domestic and international travellers is likely to increase.”
Domestic demand to prop up Japan's accommodation market
With the COVID-19 restrictions still in place, the accommodation market in Japan will be supported mostly by domestic demand in 2021 and throughout Q1 2022, with little demand from foreign visitors. If the Olympic Games to be held in July 2021 goes ahead as planned, this may give demand a boost; but any effect on demand is likely to be limited.
It is possible for accommodation demand from foreign visitors to recover, if travel restrictions are eased globally, after COVID-19 is resolved through the provision of vaccines and various other policy measures.
Deals are limited as hotel owners wait and see
Investors have placed more faith in hotels in urban areas and established resort destinations, with transactions of limited-service hotels still higher than 2017 levels. In addition, Colliers notes that some hotels have managed to break even with the trickle of lesiure and extended-stay business arrivals, while others have signed up as quarantine facilities.
Although green lanes for business travel have emerged, the development of travel bubbles has been slow. Deals in areas such as the South Pacific and Southeast Asia have been limited, with owners adopting a wait-and-see approach, as banks are more willing to offer forbearance given stronger balance sheets and lower exposure to leverage covenants.
Cruise industry has been recovering quickly in H12021
The cruise industry faced its toughest year in 2020. In Asia, nearly all major cruises have been suspended since March 2020 and have altered future bookings until COVID-19 eases.
Nevertheless, the industry is also one of the fastest recovering sectors in 2021.
With pent-up demand for overseas travel, along with an increasing number of vaccinated citizens across various countries, the cruise sector in Asia has been picking up steam over the last six months. In Singapore, for example, more than 120,000 people have set sail on “cruises to nowhere,” with no COVID-19 cases on board, since a pilot programme to reboot the cruise industry began last November.
Colliers anticipates any meaningful recovery to continue to be directly linked to the removal of quarantine restrictions in both source and destination markets, as demand for cruises continues to ramp up with the rollout of mass vaccinations in Asia and worldwide. This will bode well for both home and destination ports, with Asia poised to become the largest source market for cruises globally over the next decade.
Find out more about and download the Colliers Hotel Insights | Q2 2021 report here.