Confidence in Asia-Pacific’s hotels & hospitality market continues to grow as borders reopen, investment appetite increases and operating performance approaches pre-pandemic levels, according to the latest research from CBRE.
The recovery is being largely driven by domestic travel demand, particularly in North Asia and Pacific markets, with overall tourist arrivals to Asia-Pacific expected to reach pre-pandemic levels by 2024. While international arrivals to the region continue to rise, they remain well below pre-pandemic levels.
Markets that were quicker loosening restrictions for vaccinated travelers (Australia, Singapore, India, Thailand) are seeing a much more pronounced return of tourists than those that retain stringent entry or testing policies (South Korea, Indonesia), or mandate quarantine periods upon entry (Japan, mainland China, Hong Kong SAR, Taiwan).
“As borders reopen, confidence is returning to the Asia-Pacific hospitality sector, confirming that when people can travel, they will travel,” said Henry Chin, global head of investor thought leadership & head of research, Asia-Pacific. “The reopening across the region has been fragmented, with uncertainty around the opening of mainland China, Hong Kong SAR and Japan borders somewhat weighing on tourism sentiment in the region.”
ADR, occupancy and RevPAR is trending higher in all Asia-Pacific markets, with a regional recovery to pre-pandemic levels expected by 2024. With the supply pipeline remaining limited in most Asia-Pacific markets, the risk of new hotels saturating the market is low, putting less pressure on room rates and revenue. Operating expenses have increased significantly across all revenue streams, particularly for labor costs and utilities.
Investment in Asia-Pacific hotels rose to $10.1 billion year-to-date as of August—an increase of 17% year-over-year. Cross-border capital flows into Asia-Pacific hotel assets have reached $932 million since the beginning of 2021, driven predominantly by institutional investors. Investment was spread across a range of Asia-Pacific markets, with South Korea accounting for the largest share at $2.8 billion in the first half of the year, followed by mainland China, Australia, Japan and Singapore.
“In an evolving economic climate, daily pricing structure and flexibility of rate changes means hotels can provide an inflationary hedge,” said Steve Carroll, head of hotels & hospitality, capital markets, Asia-Pacific, CBRE. “The loosening of border controls, rising tourist sentiment and investors’ strong capital reserves are underpinning increased appetite for operational real estate, with well-located, high-quality hotel assets in key markets keenly sought after.”