With further consolidation in Asia hotel market, investors may turn to REITS and equity stakes in hotel operators, saying Colliers International research.
- Singapore continues to witness robust visitor arrivals and hotel occupancy
- Kuala Lumpur 7th most visited city in the world; hotel investment driven by HNWIs from Malaysia, Middle East and Hong Kong
- Hotel transaction market subdued in 2018; further consolidation expected in 2019
- Macau & Singapore continue to dominate Asian Gaming Market
- Planned new attractions coupled with relatively low new room supply should continue to underpin hotel fundamentals in Singapore over the medium term
Colliers International on May 30 released the Hotel Insights Q2 2019 report, a quarterly digest of key trends in the Asia hotel market.
Govinda Singh, Executive Director of Valuation & Advisory Services, Asia, at Colliers commented: “Hotels across Asia Pacific have had a tough Q1 2019 compared to the prior year quarter, with overall room occupancy and average daily rate showing decreases to 67.4% and USD103.46 respectively. The US-China trade dispute is starting to weigh on business and consumer confidence, thereby tempering demand growth. However, intra-Asia and growing domestic travel in the larger destinations across Asia is likely to continue to underpin demand in the region and we expect an upturn in performance in the coming months.”
Top Destinations in the Asia hotel market
Tourism arrivals in Singapore are expected to grow by 3.5% in 2019 following a relatively strong performance in 2018. In 2019, visitor arrivals are expected to reach 19.2m, with a further 3% growth forecast for 2020. This is a robust performance after the stagnant figures in 2015, and strong growth in 2016, and is mostly underpinned by an increase in visitors from North and South Asia, and in particular China, Indonesia and India.
Room occupancy remains well in excess of 83% despite the new supply. And as tourist arrivals increase, with a positive economic and geo-political outlook, we expect room occupancy to continue to grow in 2019 and beyond.
Kuala Lumpur is currently the 7th most visited city in the world, and the 3rd most visited city in Southeast Asia after Bangkok and Singapore. The city has recorded 12.58 million international visitors in 2017, which saw an 11.5% increase in tourist numbers as compared to 2016, a commendable turnaround following the airline tragedies. This also demonstrates the resilience in this market, with only supply growth continuing to temper performance fundamentals.
Overall, hotel investment in Kuala Lumpur is likely to be driven by HNWIs from Malaysia, the Middle East and Hong Kong looking for opportunistic buys or trophy assets. Buyers from China, Indonesia, Taiwan and Thailand are also looking for investment opportunities, although concerns over China’s restrictive policy for outward investment and the country’s political aims seem to persist.
Asia hotel market Investment Outlook
After a strong 2016 and 2017, which witnessed a number of high profile transactions, the dearth of supply has meant that the 2018 transaction market was relatively subdued in comparison. In 2019, this trend has continued, as owners consolidate their portfolios and seek opportunistic investments. We expect further consolidation and strategic investments to be the theme for 2019 as the sector remains a key investment target. This will be supported by assets being injected into REITs, and even consolidation of REITs to take advantage of high valuations.
Colliers said that its top destinations for hotel investment in 2019 will be Japan and key secondary cities across the region, with mid-market and lower hotels being the main target for those chasing yield.
Gaming Market Recovers Across Asia Hotel Market
2018 was a strong year for casinos across Asia. From Macau to Cambodia, operators boasted strong gross gaming revenues (GGR) as the market recovered from its slump. While VIP revenues have continued to witness a significant drop especially in Macau, mass market play continues to gain ground, with 2018 gross gaming revenue increasing by 14%, recording the second consecutive year of gain as demand from the Mainland Chinese continued to rebound after a prolonged slump.
Colliers estimate of total potential GGR in 2019 is circa US$91.7 billion, mostly driven by the traditional mature destinations of Macau and Singapore. With the recent announcement of Singapore IR’s expansion, Japan’s imminent foray into this market, and Cambodia and Vietnam’s ambitions, we expect some turbulence in the coming years especially as demand matures across the region.
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