Cushman and Wakefield’s HotelViews 2015 – an annual publication covering a clinical assessment and outlook of the hotel market performance in 18 cities across Asia – has revealed in the first eight months of 2014, the Asia Pacific region welcomed 5% more international tourists (overnight visitors) compared with the same period in 2013, with more than 1.1 billion tourists expected by the year-end.
According to the UNWTO, the South Asia sub-region was a star performer alongside North America, with growth at 8%. Arrival growth in South East Asia was however, negatively impacted by regional geopolitics and negative reactions to unfortunate aviation incidents. The South East Asian region posted arrival growth of 2% despite previous robust growth in 2012 and 2013. This in turn, pulled down wider Asia Pacific growth to 5% from January to August 2014 compared to 7% in over the same period in 2013.
Hotel performance across the region reflected a ‘mixed bag’. Geopolitical instability in Vietnam, political uncertainty in Thailand and Hong Kong coupled with negative reactions to aviation incidents dented demand. However this impact was largely limited to South East Asia with Bangkok, Kuala Lumpur and Singapore experiencing softer arrival figures due to these events and the inclination for multi-city itineraries. Occupancies are expected to close 2014 down by 15.1% in Bangkok, 2.0% in KL and 1.5% in Singapore. Jakarta and Bali remained the star performers in the sub-region, as demand continued to push Average Room Rates (ADR) and drive growth in Revenue Per Available Room (RevPAR).
Singapore at US$207, Hong Kong at US$193 and Sydney at US$185 are expected to top the region with the highest ADRs in 2014. In local currencies however, markets with the fastest growing rates year-on-year in 2014 are expected to be Jakarta at ID Rupiah 1.2 million at 15.0% growth, Tokyo at JP Yen 16,465 at 7.1% growth and Ho Chi Minh City at VN Dong 1.9 million with growth at 6.5%. Strong Occupancy growth to 64% in Shanghai is also expected to boost RevPAR to CN Yuan 417, a 12% growth over RevPAR in 2013.
Continuing economic growth and enhanced flight connectivity remain strong fundamentals for future growth. Asia Pacific’s growing and increasingly affluent middle-class is the key driver for this growth. North Asia continued its growth trend as Chinese travellers flocked to sub-region neighbours, propping RevPARs (in local currencies) in Tokyo, Hong Kong and Seoul up with gains of 8.5%, 4.7% and 4.2% respectively. Continuing investment in infrastructure and visa facilitation measures enhance the industry amid recovering geopolitical situations and remain indicative of the significant focus on tourism and hospitality moving forward.
Despite a 6% decline in arrivals in Q2 2014, driven by a significant decline in Chinese visitors, demand for room nights has increased for Singapore. Demand growth in 2014 has however, been slightly slower than growth in supply as the number of available room nights increased. Although marginal growth in room rates are partially mitigating the slight downshift in occupancy, hoteliers will be challenged to sustain bottom-line margins in an environment of intensifying competition and growing costs.
In 2014, the Singapore saw a very marginal improvement of 1.0% in market-wide ADR from S$258 to S$260, but occupancy fell and is expected to close the year at about 84.3%, down from 86% the previous year due to a growing supply of rooms and the decline in tourist arrivals. With a slight dip in RevPAR expected, falling 1.0% to S$219. Despite this year’s challenges, the outlook remains optimistic with demand expected to recover in the short-term and keep pace with increasingly measured growth in supply in the medium term. Although continued focus on establishing Singapore as a corporate hub, leisure destination and MICE centre is necessary to propel growth.
“For Singapore, 2014 has definitely seen some serious challenges – with the largest part of the inbound market slowing down,” said Akshay Kulkarni, Regional Director – Hospitality for South and South-East Asia, Cushman and Wakefield.
“Despite this slowdown, the overall performance of the market has not been significant. The performance has been as robust as ever with occupancy dropping only 1.7% points despite the addition of new supply and the rates have also seen an improvement.
“This bodes well for the coming year, with inbound travel likely to go up – and with growing demand, the rates will only see northward movement.
“This shows the overall resilience of the Singapore market and the reason why it remains one of the best performing markets in the region, and one of the best for hotel investment.
“The only potential hindrance In terms of investment is the increasing capital value,” he said.