Asia Pacific Hotels MarketView

Transcription

1 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec Asia Pacific Hotels MarketView March 2014 CBRE Global Research and Consulting VISITOR ARRIVALS 6.0% y-o-y ADR: US$ % y-o-y OCCUPANCY: 68.4% +36 bps REVPAR: US$ % y-o-y 2013 INV SALES US$13.4 bn RECORD HIGH INVESTMENT VOLUMES FUELLED BY RESILIENT HOTEL PERFORMANCE Latest News Many markets across Asia Pacific experienced increases in tourist arrivals in 2013, attributed mainly to the proliferation of low cost carriers (LCCs) in the Asean region. With the exception of Brunei, Cambodia and Laos, all the other ten Asean member states have their own home-grown LCCs. The World Tourism Organization (UNWTO) is calling for APEC leaders to look at visa facilitation for the region, which can create as much as 2.6 million additional jobs in the APEC economies by 2016 and reap in an additional US$62 to US$89 billion in international tourism receipts. This would increase the existing by 9% to 13%. As China s outbound travelers increased rapidly over the years, hotel developers and investors are seeing opportunities for crossborder capital investments in other international destinations. Top domestic hotel groups such as China Lodging Group, Home Inns Group, Jin Jiang International Hotels and Wanda Hotels and Resorts Company, among others are leading by example with their aggressive global expansion strategy. Tourist arrivals increased in 2013 driven by intra-regional tourist demand Despite a slow global economic growth over the past few years, the World Travel and Tourism Council (WTTC) expects the travel and tourism industry to account for US$2.0 trillion or 8.7% of Asia Pacific s GDP in This is an 5.3% increase from 2012 and is the largest among the other regions. More importantly, it is signalling a solid performance in the hospitality sector to continue into The Southeast Asia region saw the highest tourist arrivals According to UNWTO, tourist arrivals to Asia Pacific grew by 6.0% y-o-y in 2013 driven mainly by the intraregional tourist demand. Of the submarkets, the Southeast Asia region saw the fastest growth at 10.0% y-o-y. On the country level the highest annual increase on tourist arrivals was recorded in Japan, followed by Thailand and Hong Kong. Resilient hotel performance in the region despite a slow economic recovery Reflecting the resilience of the industry, the key metrics of the Asia Pacific hotel market remained largely unchanged from the previous year. Occupancy is slightly up by 36 basis points to 68.4% while ADR declined by 3.0% to US$ Accordingly, RevPAR decreased by 3.1% from a year ago to US$ The analysis of hotel performance in USD terms, however, has to be treated with caution given recent fluctuations of exchange rates. Hotel investment volumes at the record high and the momentum to continue The total investment volumes in Asia Pacific reach the new peak in 2013 with USD 13.4 billion transacted, a 53% increase compared to the previous year. The low borrowing cost and high liquidity will continue to drive the market in Chart 1: Asia Pacific Visitor Arrivals % change over same period of the previous year) 25% 20% 15% 10% 5% 0% -5% -10% -15% Chart 2: Hotel Investment Volumes USD bn Pacific Asia Source: CBRE, UNWTO Source: CBRE, RCA

2 H Asia Pacific Hotels MarketView ASIA PACIFIC HOTELS CONTINUED GROWTH IN VISITOR ARRIVALS TO ASIA PACIFIC REFLECTS THE ABILITY OF THE TOURISM INDUSTRY TO ADJUST TO THE CHANGING MARKET CONDITIONS Hotel Demand The outlook for Asia Pacific economies remains positive according to Oxford Economics, which projects GDP growth to continue at a steady pace of 4.4%. These assumptions are based on the bottoming out of the economy in the United States, the recovering Eurozone and continued expansion in Japan, and also incorporate the downgraded outlook for Asian markets such as China, India and Indonesia. Southeast Asia is forecast to see a strong growth driven by the steady rise in domestic demand growth, particularly in private consumption and investment. In general, Asian growing economies continue to account for the fast expanding middle class and supported a solid intraregional tourist demand but also beyond. According to UNWTO s most recent data, international tourist arrivals in Asia Pacific increased by 6.0% in 2013, compared to Despite the on-going global economic uncertainties, Asia Pacific continued to experience a high growth in tourist arrivals, reflecting the ability of the tourism industry to adjust to the changing market conditions. Southeast Asia was the fastest growing submarket with a 10.0% y-o-y rise in arrivals, followed by South Asia (5.3%) and Oceania (4.4%). On the country level the highest increase was observed in Japan, followed by Thailand and Hong Kong. Japan lead the pack with a large y-o-y growth of 24.0% in 2013, receiving an approximate 10.4 million visitors. This marks an incredible achievement, considering Japan s setback with the 2011 disasters. The large growth was made possible with the growing wealth of emerging economies and greater flight capacity of low-cost carrier flights to Japan, depreciation of the Yen and the easing of visa requirements from some Southeast Asian countries. Despite all its political problems, Thailand received 26.7 million visitors in 2013, which represents a 19.6% year-on-year growth. This achievement exceeds the tourism board s original target of 26.1 million visitors and spurred them to target million visitors in 2014 despite the current political unrest. As a key gateway city, visitor arrivals to Hong Kong continued to increase in 2013, setting a 11.7% growth over the previous year. Hong Kong is targeting to receive over 70 million visitors in 2017, with government plans and policies put in place to ensure adequate resources such as tourism attractions, hotel accommodation and public transport to cater to the tourism industry. However, Hong Kong also remains vulnerable to the expected weaker growth in China outbound tourism due to changes in government policies that increased the cost of overseas travel packages for tourists and limit the travel opportunities for government officials. 2 Chart 3: Growth of Visitor Arrivals in 2013 Japan Thailand Hong Kong Vietnam Taiwan Indonesia South Korea Singapore Australia New Zealand 0% 5% 10% 15% 20% 25% 30% Source: CBRE, Chart 4: Hotel Occupancy in Key Gateway Cities 87% 85% 83% 81% 79% 77% 75% Dec-2012 Apr-2013 Aug-2013 Dec-2013 Singapore Hong Kong SAR Melbourne Sydney Tokyo Source: CBRE, STR

3 Singapore Hong Kong Taipei Sydney Seoul Melbourne Tokyo Ho Chi Minh City Kuala Lumpur Auckland Jakarta Bangkok Shanghai Beijing ASIA PACIFIC HOTELS Hotel Occupancy Occupancy in the Asia Pacific hotel market largely remained the same in 2013 at 68.4%, an increment of 36 basis points from Singapore and Hong Kong are two mature hotel markets, which often reach full capacity and operate at above 80% occupancy with minimal fluctuations. Hotel occupancies in the Tokyo market has recovered significantly among the five gateway cities, with a 4.4% increase over the past year. Melbourne and Sydney have also seen an increasing trend in occupancies with a 3.6% and 2.7% increment, consistent with steady growth in visitor arrivals and strong domestic business travel. Hotel Performance In USD terms, it is no surprise to see mature hotel markets such as Singapore and Hong Kong to command the highest ADR in Asia Pacific. Hotels across Asia Pacific averaged an ADR of US$124.10, which is 3.4% lower than in The analysis of hotel performance in USD terms has to be treated with caution as much of this general decline can be attributed to recent currency fluctuations. In local currency terms, however, a different story of resilience in the developing hotel markets such as Jakarta, Bangkok, Auckland and Taipei can be seen. In 2013, the top three cities with the highest growth of RevPAR in local currency terms were Jakarta, Tokyo and Bangkok. In Jakarta, RevPAR reached IDR772,779 in 2013, representing a 13.8% y-o-y growth, bolstered by the strong growth in visitor arrivals and to a certain extent, the depreciation of the Indonesia rupiah, which is a result of changing market sentiments in reaction to the probable tapering of U.S. monetary stimulus. The development potential in Jakarta and other parts of Indonesia remains high with the potential prospect of high development yields. The Tokyo hotel market achieved a RevPAR of 13,455 yen in 2013, representing a y-o-y growth of 12.5%. We believe Tokyo is on track to see higher RevPAR growth in the coming years due to the ongoing improvements to tourism attractions, infrastructure and transportation systems in anticipation of the 2020 Summer Olympic Games. Even though Bangkok is currently facing a tense political turmoil, the hotel sector had performed well in 2013 in terms of RevPAR performance. Bangkok hotels achieved a RevPAR of 2, baht in 2013, a 12.0% increment over Affordable room rates in Bangkok, compared to other regional destinations is considered to be the main pulling factor for visitors, especially from emerging markets such as China and Russia. However, we note that the economy has begun to slow as the political lockdown continues. GDP grew by 2.9% in 2013, compared to 6.5% in Thai consumer confidence had been severely hit and the government had revised its 2014 GDP growth forecast to a range of % from the initial %. In addition, the tourism authority forecasts a decline of 7.3% in visitor arrivals in Q from the same period in On the other end of the spectrum, Seoul registered a decline of 10.6% in RevPAR. Even though visitor arrivals to South Korea in 2013 have increased by 9.30% over the previous year, we noted that the declining occupancy could be a result of an increase in the number of people who want to save money on hotel accommodation by staying with their friends and relatives. In addition, the political tensions between Japan and Korea are still present, which result in a decline of Japanese visitors. Furthermore, the decline in ADR may also attributed to the price pressure mid-tier hotels are putting on the market as they lower their rates to attract tourists. H Asia Pacific Hotels MarketView Chart 5: ADR across Asia Chart 6: RevPAR Performance 3 ADR (US$) Jakarta Tokyo Bangkok Melbourne Sydney Auckland Taipei Kuala Lumpur Ho Chi Minh City Shanghai Singapore Hong Kong Beijing Seoul Source: CBRE, STR -15% -10% -5% 0% 5% 10% 15% % change in local currency Source: CBRE, STR

4 H Asia Pacific Hotels MarketView ASIA PACIFIC HOTELS IN SYDNEY, A LIMITED NUMBER OF NEW HOTEL DEVELOPMENTS IN THE CBD AREA, COMBINED WITH STRONG DEMAND LEVELS WILL SUPPORT STRONG HOTEL PERFORMANCE MOVING INTO Chinese markets such as Beijing and Shanghai are also experiencing a decline in RevPAR (4.7% and 0.5% respectively). Hotel markets in China are continually facing challenges of large supply, coupled with the price pressures in the markets where ADR is already relatively low, even for the upscale and luxury segment of the market. Hotel Supply According to STR, there are up to 2,063 hotel developments or 455,573 rooms in the pipeline in Asia Pacific as at January China tops the list of the highest number of hotel rooms in the pipeline with 144,954 rooms in 481 hotels. The vast number of hotel rooms under construction or in planning in China reflects confidence of developers combined with the rapid urbanisation and forecast economic growth of 7.5%. That said, amply existing supply puts pressure on hotel revenues and future development growth of 25% to 75% in Tier 2 and Tier 3 cities will put further stress on developers. Ranked second is India with 31,073 rooms in 189 hotels, followed by Indonesia (23,778 rooms in 149 hotels), Philippines (8,324 rooms in 35 hotels) and Thailand (5,450 rooms in 34 hotels). In contrast, Bangkok and Hong Kong are expecting a pipeline growth of 3% per annum between 2014 and 2015 while Singapore is expecting a 6% growth per annum. Focus on Sydney The recent Ashes cricket series provided a strong start for Sydney in 2014, with the January STR data indicating a occupancy levels increasing 4.8% to 79.9% and the ADR increasing 8.8% to A$200.2 when compared to January This followed on from a strong 2013 performance with area wide occupancy at 83.0% on an ADR of A$ There are minimal hotel projects planned for the CBD primarily due to hotels typically not being the highest and best use for sites, with residential development sites keenly sort. Projects of note include the expansion of Sheraton Four Points to include 200+ keys and additional conference space, the planned redevelopment of two heritage listed sandstone buildings and the construction of a 450+ key hotel as part of the Sydney International Convention Exhibition and Entertainment Precinct redevelopment. The additional rooms may be somewhat offset by the planned conversions (a total of 1,023 keys) of the Menzies Hotel into a commercial property, the Sir Stamford Circular Quay, Mercure Potts Point and the Vibe Rushcutters Bay into residential properties. We expect to see an increase of limited serviced hotels developed in fringe CBD areas facilitating demand due to the lower land and development costs. With limited new supply and strong demand levels, we expect further ADR growth, with occupancy levels maintained at historic highs, however, with the Sydney Convention Centre now closed for redevelopment the ratesensitive Sydney hotel market can maintain the early momentum. 4 Chart 7: Selected Hotel Openings Year of Opening Hotel Name Location Proposed Number of Rooms 2014 Sheraton Melbourne Hotel Brisbane The Parnas, Luxury Collection by Starwood Seoul Mandarin Oriental Bali Bukit Pandawa Parkroyal Chengdu Chengdu Courtyard by Marriott Singapore Novena Singapore 250 Source: CBRE

5 ASIA PACIFIC HOTELS Hotel Investment The Asia Pacific hotel investment volumes reached the historic record high in A total of US$13.4 billion were transacted in 143 transactions. Strong investment demand, a 53% rise in volumes, was fueled by the low cost of borrowing in particular from Asian investors. The record breaking performance was supported by excess of liquidity, growing competition and increasing prices in the direct real estate investment market. That said, there is a strong likelihood of interest rates increases as the global economy improves and central banks are expected to exit their loose monetary policies in the coming years. In Asia Pacific, this will firstly happen in emerging Southeast Asia economies. While China remains focused on reining in lending and dampening the impact of fast credit growth. The immediate effects of tapering may be limited but evident and investors start to prepare on rates shifting. CBRE expects the pace of tapering to be gradual and in sync with the cautious economic recovery in the United States. Asia Pacific is also under the effect of monetary easing programmes such as Abenomics in Japan and rate cuts by the RBA in Australia. In summary, low borrowing cost and high liquidity will continue in 2014 although banks may become more selective toward some lending. Asian investors as a source of capital investing in the hotel market dominated. In 2013 and 2014 respectively 86% and 92% of all transactions were completed by Asian investors. North Asian capital from Greater China and Japan was the most prominent indicating strong activity both in their domestic markets but also across borders. Notably, the European and North American investors have slowly started to return after the breakthrough in In 2013, 36% of all transaction by volume as well as the largest five hotel deals took place in Hong Kong, making it the most active hotel market in the region. Similarly to Hong Kong, transaction prices achieved in Singapore in 2013 were extremely high fuelling Singapore s position of 16% of overall volumes. That said, the most active market by number of transactions was Australia (36 hotel transactions), followed by China (31 transactions) and Japan (30 transactions). The strong drive for the largest investment markets in Asia Pacific is in line with the wider investors consensus and their particular interest in these developed investment destinations. Moving into 2014, CBRE expects the hotel investment volumes to remain high and also investors to move up the risk curve and look for hotel investments in smaller markets targeting secondary assets in search of improved returns. A TOTAL OF USD13.4 BILLION OF HOTEL TRANSACTIONS WERE COMPLETED IN 2013 MAKING IT THE MOST ACTIVE YEAR ON RECORD. H Asia Pacific Hotels MarketView Chart 8: Investment sales by source of capital Chart 9: Investment sales by country in % 90% 80% 70% Pacific Rest of Asia Maldives 1% Australia 14% Rest of APAC 1% 5 60% 50% 40% 30% 20% 10% 0% Southeast Asia North Asia EMEA Americas Source: CBRE, RCA Singapore 16% Japan 16% Hong Kong 36% China 16% Source: CBRE, RCA 5

6 H Asia Pacific Hotels MarketView 6 ASIA PACIFIC MARKET OUTLOOK GREATER CHINA The vast majority of cities in China and their hotel markets are becoming fully saturated, resulting the activity shifting or extending to smaller tertiary cities, where they have planned future supply growth of between 25% to 75%. ADR growth potential will be limited as hotel operators may look to price reduction to drive occupancy in these tertiary markets where demand base may already be weak. Taipei s hospitality sector is set to receive a boost after the government announced expansion plans to turn Taoyuan International Airport into a regional aviation centre by The US$16.5 billion development will include a free trade zone, a third airport terminal and an industrial park. The new terminal is expected to double the existing capacity of the airport and handle up to 60.0 million passengers annually. ADR levels in Hong Kong are expected to soften in the short term future due to an increasing supply of hotel rooms entering the market, as well as gradual tapering of visitor arrivals to the city caused by the growing competition from other regional destinations. Furthermore, the high accommodation costs may cause guests to cut their accommodation budgets and shorten their stay. Coupled with the increasing operating costs, this will put further pressure on revenue growth. NORTH ASIA Much attention will be on Tokyo as the government began to make improvements to its infrastructure and transportation system in anticipation for the 2020 Olympic Games. A new 1.7 hectare retail development, the Senkyaku Banrai complex, is set for the Toyosu district of Koto Ward. Situated within walking distance of the Olympics venues, the complex is expected to attract an estimated 4.2 million visitors when it is expected to open in March In a bid to improve its tourism infrastructure and enhance its MICE destination awareness, South Korea has given the go-ahead for the development of an Integrated Resort, approximately 2.3 million sqm at Seogwipo City, Jeju. Expected to open in phases from 2017 onwards, the US$2.2 billion project comprises luxury hotels, a shopping mall, a theme park, gaming and entertainment facilities. SOUTH EAST ASIA In Indonesia, Bali is expected to face a more severe hotel supply situation than Jakarta in As the rooms supply continue to outpace the visitor arrivals, the hotel market in Bali is facing intense price pressure, not leaving much growth potential for the room rates. Faced with a slowing economic growth and higher business costs in Jakarta, corporate demand for low cost hotel accommodation has been increasing. Midscale and economy hotels are bracing themselves for limited growth potential in ADR as the two segments become more competitive with an expected influx in supply in 2014 and beyond. Due to the ongoing political turmoil, the Bangkok economy has taken a hit with a decline in January imports and the tourism industry is also adversely impacted. Visitor arrivals in Janaury has begun to slow despite 2013 being a record year for Bangkok. According to the Thai Hotel Association, occupancy rates recorded for hotels in the Capital were around 50%, in comparison to the 80% recorded last year. The Ministry and Tourism Malaysia have set a target of 28 million tourist arrivals and US$23.0 billion in tourist receipts for Visit Malaysia Year A key strategy for the tourism blueplan is to enhance connectivity from priority tourism markets such as India, Australia, Japan and China. However, we remain cautious for the hotel market performance in Kuala Lumpur, a result of the probable rising operation costs for hotel properties. This is due to the GST implementation, electricity and water tariffs hikes and the revision of assessment rates and revaluation exercise for property tax. Coupled with the influx of new hotel supply and a projected softer growth in visitor arrivals, we expect a slower growth in ADR and RevPAR for the Kuala Lumpur market. The high room rates in Singapore are either deterring visitors from extending their stays or pushing them towards to staying with friends/families. From the operation point of view, the key challenge is for hotels to manage the increase in costs, yet still maintain quality standards and competitive accommodation pricing for guests. This is especially pertinent in the light of increasing regional competition. RevPAR performance has declined in 2013 and is expected to continue to soften in International visitor arrivals to Vietnam has been consistently growing since The tourism authority has targeted 8 million international visitors in 2014, a 5.6% growth from 2013, by a sustaining growth from its traditional feeder markets, Russia, China and Asean countries and exploring developing markets such as the Middle East and India. For instance, occupancy levels in the Ho Chi Minh City hotel market is expected to see positive growth in 2014, however, the key challenge of the lack of tourism infrastructure remains.

7 CONTACTS For more information about this MarketView, please contact: CBRE Research & Hotel teams CBRE Pte. Ltd. 6 Battery Road #32-01 Singapore (049909) t: w: Co. Reg. No R Agency Licence No. L I Petra Blazkova Head of Research Singapore & South East Asia t: e: petra.blazkova@cbre.com.sg H Asia Pacific Hotels MarketView Robert McIntosh Executive Director Asia Pacific t: e: robert.mcintosh@cbre.com Zhang Jiahao Consultant Asia Pacific t: e: jiahao.zhang@cbre.com.sg Art Buser Executive Managing Director Asia Pacific t: e: arthur.buser@cbre.com Ken Smith Regional Director Australia t: e: ken.smith@cbre.com.au Definitions: 7 ADR: Average Daily Rate ( ADR ) is a ratio that indicates the average price for one overnight stay at a hotel. It is calculated by dividing total rooms revenue by the number of rooms occupied. AOR: Average Occupancy Rate ( AOR ) is calculated by dividing Rooms Occupied by Rooms Available. Complimentary rooms are not included in the Rooms Occupied. RevPAR: Revenue Per Available Room ( RevPAR ) is the total hotel room revenue divided by the total rooms available to rent for a day or range of dates. Markets covered: We have reviewed the market coverage for the report. From H2 2013, Australia and New Zealand are also included together with China, Hong Kong, Indonesia, Japan Malaysia, Singapore, South Korea, Taiwan, Thailand and Vietnam. 7

8 H Asia Pacific Hotels MarketView FURTHER INFORMATION + FOLLOW US GOOGLE # /posts FACEBOOK es/cbre/ TWITTER rch Global Research and Consulting This report was prepared by the CBRE Hotels and CBRE Research Team which forms part of CBRE Global Research and Consulting a network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate investors and occupiers around the globe. Disclaimer CBRE Limited confirms that information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt their accuracy, we have not verified them and make no guarantee, warranty or representation about them. It is your responsibility to confirm independently their accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. Agency Licence No: L I 8