For a sign of how sentiment in Asia’s commercial real estate industry has shifted since China abruptly scrapped its zero-Covid policy at the end of last year, look no further than the share price of Dusit International , one of Thailand’s leading hospitality groups. Since the end of November, the stock has surged by nearly 21 per cent, significantly outperforming the S&P Asia Pacific Reit Index, a gauge of listed real estate investment trusts in several countries in the region. As of Monday , Chinese holidaymakers are allowed to travel overseas in tour groups again. Thailand expects to welcome 7 to 10 million Chinese tourists by air this year, close to 40 per cent of its target for international arrivals. Last year, Malaysian and Indian holidaymakers ranked first and second, respectively, among foreign arrivals yet together accounted for just 3 million visitors compared with the 11 million Chinese tourists in 2019. The average hotel occupancy rate in Thailand in December rose sharply last year but was still below its level in early 2019, according to data from STR. In Vietnam, another market heavily reliant on Chinese outbound tourism, the occupancy rate was down on early 2019 levels. China’s rapid reopening is expected to provide a major fillip to Asia’s pandemic-battered hotel industry. Even before Beijing abandoned its zero-Covid policy, Asian hotels were enjoying a brisk recovery as economies reopened, unleashing pent-up demand for leisure and corporate travel. Last year, hotel transactions bucked the sharp decline in Asian commercial property investment volumes, rising 7 per cent year on year, according to JLL data. Nihat Ercan, head of investment sales Asia Pacific at JLL, said that following the crucial reopening of Japan’s economy last October , the end of China’s self-imposed isolation ensures that “the final piece of the recovery is in place”. The retail industry is the other big beneficiary of China’s reopening. While there are questions about the strength of Chinese “ revenge spending ” – particularly the share of excess household savings that is likely to be deployed into spending given the scarring from the pandemic and the crisis in the country’s residential property market – the outlook for high-end retail has brightened significantly. According to the results of a survey conducted by CBRE in November and December last year, Hong Kong and Singapore were the most attractive destinations in Asia for cross-border expansion by retailers after Tier 1 cities in mainland China. Hong Kong’s beaten-up retail industry has the most to gain. With tourists having accounted for about 30 per cent of the city’s total retail sales before the pandemic and high street shop rents in core districts a fraction of their levels in 2015, the scope for a Chinese tourist-driven revival of the city’s retail sector is considerable. CBRE expects Hong Kong’s high street rents to rise 5 to 10 per cent this year following several years of annual declines. Other markets popular with Chinese tourists also stand to benefit. Having been among the world’s biggest spenders on luxury goods in the decade before the pandemic erupted, Chinese shoppers are expected to eventually resume their purchases at brands’ flagship stores in Paris, Milan and London. Vivek Kaul, head of Asian retail at CBRE, said China’s reopening was “a game changer, not just for Asian retail but for global retail”. Yet, the post-zero-Covid world is far from a return to pre-pandemic conditions. China has thrown off the shackles of border closures and citywide lockdowns at a time when global rates of inflation are still high, interest rates continue to rise and pandemic-induced disruptions to businesses and consumers persist. The unprecedented increase in companies’ operating costs is exacerbated by acute labour shortages . The findings of the CBRE survey revealed that Asian retailers’ biggest concerns this year were inflation, staff shortages and the higher costs of running an online business. Worries about inflation – which has almost certainly peaked – could intensify if China’s reopening ends up rekindling price pressures . Hotels act as an inflation hedge as short lease periods enable operators to adjust their prices much more quickly. The ability of Asia’s hospitality industry to handle the mass return of Chinese tourists is a concern, albeit one operators welcome given how slim the chances of a rapid Chinese reopening were just several months ago. Ercan noted that “when operators drew up their budgets for 2023, the assumption was that a full reopening would occur only towards the end of this year, and possibly even later”. Make no mistake, the sudden end to China’s self-imposed isolation is the dominant theme in Asian real estate this year, along with uncertainty about when interest rates will peak, and even start falling. For the region’s hotel and retail sectors, China’s reopening is the long-awaited catalyst for a meaningful recovery, particularly in those markets most exposed to Chinese consumption. While the strength and side-effects of the upturn are the subject of intense debate, Asia’s real estate industry is much better off with a Chinese exit from zero-Covid than it is without one. Nicholas Spiro is a partner at Lauressa Advisory