HONG KONG—The “Defying Gravity” theme of the 23rd annual Hotel Investment Conference Asia Pacific is a perfect description of the region’s hotel performance, according to conference founder Rob Stiles and STR Global’s Jonas Ogren.
Stiles told the 800 attendees—the second-largest attendance in the conference’s history—jamming into the ballroom at the InterContinental Hong Kong that while there are reasons to be cautious, the overall mindset is “full speed ahead.”
“Growth has been moderating and continues to moderate around the world, even in Asia,” he said. “And there are black swan issues in the background that could create a big dent, but overall in Asia, it’s firing on all cylinders.”
“The mature economies … Tokyo, Seoul (South Korea), Hong Kong, Singapore and others, are performing at occupancies of 80% or more,” Stiles added. “It’s really in emerging markets where the surge in development has gotten ahead of itself.”
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| HICAP founder Rob Stiles said Asia’s hotel industry is firing on all cylinders. |
Stiles said financing fundamentals continued to be muted, with a limited number of non-recourse debt available in the region. But there’s a silver lining, he said.
“There are more and more active opportunity funds that have an appetite for hotel product moving across the region,” Stiles said.
Ogren, STR Global’s area director for Asia, echoed the founder’s positive report. “We really see an elongated comeback,” he said. “Asia continued its sustained growth that it experienced before the crisis.” STR Global is the sister company of HotelNewsNow.com.
Ogren pointed to a number of year-to-August data points as proof, including:
- The region experienced a 9.3% year-over-year increase in revenue per available room (measure in U.S. dollars);
- measured in local currency, average daily rate increased more than 20% in Tokyo and more than 10% in Jakarta, Indonesia, Seoul and Beijing; and
- Singapore was crowned king of the RevPAR race at US$233.97—seven cents higher than Hong Kong.
“Hong Kong had incredible rate growth in 2011, and it has continued in 2012—it’s probably the strongest story in Asia/Pacific as a whole,” Ogren said. “Asia is definitely back, although it is a little more moderate than a year ago. Most of the growth is rate-driven.”
Ogren said China is one area that has seen growth moderate during the past 18 to 24 months.
The development pipeline for the region has grown steadily during the past three years, from 323,000 rooms in August 2010 to 377,440 rooms in August 2011 to 436,740 in August 2012, he said. Half of those rooms are under construction, he said.
“Development and building hotels in this part of the world has been speeding up the last couple of years,” he said. “It’s quite a sizable pipeline.”
He said 65,000 more rooms are projected to open by the end of this year, 102,000 will open in 2013; and 120,000 will come online in 2013. Thirty-two percent of the pipeline is in the upper-upscale segment, followed by upscale (25%), luxury (24%); midscale (16%); and economy (less than 1%).
Ogren also said 56% percent of the pipeline is in China. The next closest country is India with 16%; Indonesia is at 7%, and Thailand is at 6%.
Despite the good data report, there are risks that need to be mitigated, said Chris Pockette, president of Tabor International, a management consultancy focused on Asia.
“Risk management comes down to one simple question: Do we know what we think we know?” he said.
He pointed to several overall economic and political issues that could potentially derail any recovery: battles over hydrocarbons reserves, fishing boundaries and control of key land masses teaming with natural resources.
While the European debt crisis certainly will affect Asia, Pockette said that another issue could haunt the region—and others around the world—for a much longer time.
“Declining freshwater is a macro risk,” he said. “Looming regional water shortages have the capability to seriously impede Asia’s growth. Something has to change, or something has to give.”