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

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The dining room of the Bulgari Hotel in Shanghai overlooks the iconic skyline of the Pudong financial district. Photo: Handout

Published: 3:30pm, 27 May 2019Updated: 10:29pm, 27 May 2019

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.

According to a report by property adviser Jones Lang LaSalle in February, the Asia-Pacific hotel market is expected to be “the stand-out region from a growth standpoint” this year, with transaction volumes expected to grow 15 per cent year on year. By contrast, investments in European hotels are forecast to decline by 5-10 per cent – partly because of political uncertainty across the region – while transactions in the Americas are projected to remain flat.

Asia has been enjoying strong growth in international tourism. The latest data from the UN World Tourism Organisation shows that the Asia-Pacific region experienced the highest increase in international visitor arrivals in the first quarter of this year, up 6 per cent, compared with 4 per cent in Europe and 3 per cent in the Americas. The growth was driven by a 9 per cent rise in arrivals in northeast Asia, with “a very solid performance from the Chinese market”.

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.

Hong Kong’s high occupancy of nearly 90 per cent – much higher than the regional average of 71 per cent – allowed the city’s hotel market to achieve 10 per cent year-on-year growth in local currency terms in revenue per available room, which is calculated by multiplying the average daily rate by the occupancy rate. This reflects continued solid demand from mainland tourists, data from CBRE shows.

Tourists from mainland China pose for photos at the Avenue of Stars along Victoria Harbour in Tsim Sha Tsui on May 2. Photo: Sam Tsang