Speaking at HICAP Update 2019 in Singapore, STR’s Jesper Palmqvist said that 2018 was a year that saw major markets further afield like US and Europe are bouncing back.
Hotels in regions around the world performed strongly across several indicators last year despite global geopolitical events and concerns of slowing economic growth, according to hotel research company STR.
Speaking at HICAP Update 2019 in Singapore, STR’s Jesper Palmqvist said that 2018 was a year that saw major markets further afield like US and Europe are bouncing back.
The US market saw a near-record performance in terms of transaction volume, hitting US29.5 billion as compared to 2017’s US$19.8 billion. Price per room also recovered from a dip in 2017 and rose to US$256.
In Europe, the hotel industry benefited from major events such as the Russian World Cup and market recovery in Paris, Brussels and Istanbul.
Asia rides the boom
But all eyes are on the continued boom in Asia, with growth to be distributed differently across the region.
Overall, the region saw a drastic slowing in hotel demand growth to 3.7% from 5.9%, it still continued to outstrip supply growth, which rose by 3.6%.
More hotel rooms are in the pipeline, led by China with about 38,000 rooms, followed by Japan and Australia at slightly under 60,000, surpassing Indonesia.
Japan’s hotel development is gathering pace ahead of major events such as the Rugby World Cup and 2020 Olympics, notching its highest supply growth in five years, said Palmqvist. Almost 90% of rooms expected to open within two years.
In Tokyo, hotel openings will be popping up fairly evening across four general areas, mainly clustering in the areas such as Ginza, Asakusa and Ueno (29%); Akasaka, Roppongi and Shinbashi (28%); South and Bay Area (27%)’ and Shibuya and Shinjuku (16%).
With burgeoning tourist arrivals, Vietnam’s hotel sector is delivering mostly positive, but slightly mixed results. Arrivals have leapt by 20% from 2017 levels, with 60% arriving from neighbouring Greater China and Korea regions.
Demand growth has turned negative for the first time in three years, with occupancy falling, but average daily rates (ADR) have steadily climbed, averaging a 3% growth since 2016. Ahead, the country is expecting more than 40,000 rooms, with a third to join the market by the year end.
Country comparisons
In series of a side by side comparisons, Palmqvist expects that Hong Kong will lead Singapore, with a rise in projected ADR of 4- to 5% compared to 1.5- to 2%.
While Australia and Japan are expected to see strong surge in supply, demand is expected to remain similar in Australia while softening in Japan. In 2018, hotels in Japan have also pulled ahead of Australia in terms of revenue per available room (RevPAR).
China will continue to dominate the spotlight, although supply growth as well as occupancy and ADR continue to grow at a slower pace, fuelled by increased domestic travel.
On the other end of the spectrum, Malaysia’s growth has flatlined, declining from 2017’s 7.8% growth and saw its lowest occupancy in three years.
In Indonesia, Bali posted a strong recovery, hitting the highest RevPAR in the last 10 years, with demand cooling to 4.8% from a high in 2016, which saw 14.3% rise. The island recovered its occupancy and ADR rates, which surged strongly from July onwards.
Casino demand continues to be a key performer in the Philippines, with demand outpacing supply over the last three years. Currently, only one in three are branded properties, but this about to change as three quarters of new hotels arriving will be international brands, with half sitting in the upper midscale to upscale segments.
In Thailand, business is expected to carry on per usual. Capital city Bangkok continues to lure investors and developers, with 12,000 keys in the pipeline that will likely be absorbed by the market.
More interest is building in Cambodia, particularly in Phnom Penh. Some volatility is expected as occupancy rates drop with new hotels entering the market, balanced by the growing ADR during off-seasons.
Struggling to find its footing, Myanmar has seen occupancy reaching the low 40s, with ADR dropping.