As tourism in the Asia-Pacific booms, the hotel industry is the real estate sector to watch
- While mature markets in the region, such as Hong Kong and Japan, are performing strongly, mainland China is driving growth in development and investment
- Meanwhile, Vietnam, which recorded the strongest growth in visitor arrivals, is the standout hotel market
Last year, Asia’s hotel sector accounted for just over 5 per cent of commercial real estate deals across the region. Yet the industry’s small share in investment transactions belies the strong performance and growth potential of a market that is one of the biggest beneficiaries of the global increase in spending on travel and tourism.
In terms of room occupancy and underlying property performance, the region’s mature hotel markets are faring best. A report published by CBRE, another real estate adviser, in March noted that Hong Kong, Tokyo, Osaka, Singapore, Sydney and Melbourne all boasted occupancy rates of more than 80 per cent.
Yet, while Asia’s established hotel markets are performing the best, it is the region’s less developed ones, led by mainland China, which are driving the growth in development and investment.
According to data from Jones Lang LaSalle, while the Middle East and Africa region led the increase in supply last year in terms of the share of rooms under construction as a proportion of existing rooms, mainland China (and the rest of the Asia-Pacific region) experienced a rise in development activity year on year. In the Americas, by contrast, the pipeline shrank significantly.
While average occupancy rates are considerably lower in second- and third-tier cities – 64.5 per cent and 59.6 per cent respectively at the end of last year – revenue per available room for five-star hotels across all city tiers experienced significant gains in the first-half of last year on a year-on-year basis, data from Savills shows.
What is more, private equity funds are getting in on the act, in a sign of the growing appeal of Chinese hotels as an asset class. Earlier this month, Everbright Ashmore, the real estate investment arm of China Everbright Group, teamed up with Huazhu Group, a large mainland hotel operator, to launch a private equity fund focused on hotel and residential real estate opportunities, the first such vehicle in mainland China, according to the two companies.
The boom in tourism – which is benefiting hugely from the introduction of electronic visas for 40 countries – is being facilitated by improvements in infrastructure and partnerships with the private sector.
In Asia’s buoyant hotel sector, developers and investors are finding rich pickings in mature and emerging markets alike.
Nicholas Spiro is a partner at Lauressa Advisory