CBRE MarketView Asia Hotels www.cbrehotels.com OVERVIEW Quick Stats Change from H1 11 to H1 12 HOTELS Investment turnover Prime yield ADR Occupancy RevPAR Cities SEOUL BEIJING TOKYO SHANGHAI TAIPEI BANGKOK HONG KONG HO CHI MINH CITY KUALA LUMPUR SINGAPORE JAKARTA BALI Asia markets The basket of markets that we cover in the Asia Hotels MarketView includes China,, Indonesia, Japan Malaysia,, South Korea, Taiwan, Thailand and Vietnam. Hot Topics Arrivals in Asia Pacific region were up by 4% in April 212. The submarket with the fastest growth was Southeast Asia which saw a 9% y-o-y growth. Asian hotels saw continued growth as half-year ADRs and RevPAR were 1.1% and 3.% higher than in H1 211. Investment volumes are likely to pick up in H2 212 as several deals are currently in the final stages of negotiation Asia Pacific hotel performance tracking continued moderate growth Asia Pacific hotels experienced slightly higher Average Occupancy and Average Daily Rates (ADR) in than in the same period last year. Occupancy increased from 64.6% to 65.9% while ADR rose slightly by 1.1% to US$143.7, putting the hotel sector on par with its 28 performance just before the impact of the global financial crisis. Revenues from the region s hotel rooms accordingly rose as the half-year Revenue Per Available Room (RevPAR) grew by 3.% from a year ago to US$94.6. April tourist arrival growth slowed from March level According to STR Global, tourist arrivals to Asia Pacific region grew by 4% y-o-y in April, lower than 1% in March. Of the submarkets, the Southeast Asia region saw the fastest growth in tourist arrivals of 9% y-o-y. Meanwhile, visitor arrivals to Japan rebounded by 164% y-o-y as recovery gains pace. Asia s hospitality industry remains in good shape due to strong intra-regional tourism demand. Overall quality to improve albeit concerns of oversupply in some locations A large pipeline, estimated at 375, hotel rooms, will enter the Asia hotel market over the next two to three years. Approximately 6% of it belongs to the upscale to luxury segments. In certain locations, hotel stock is expected to grow by over 2% from the 211 levels, raising possible concerns of oversupply. Some markets, like Shanghai are still recovering from a supply overhang. Slower momentum in the investment market Investor sentiments in global markets remained subdued, putting the brakes on the region s hotel investment market. Hotel transaction volumes recorded in the first half of 212 was about US$2.3 billion across Asia, a decrease of 2% compared to H1 211. investor groups accounted for the largest proportion of buyers at 45% or US$1 billion. In the second half, investment activity is likely to pick up as several deals are in the final stages of negotiation. The hospitality market may also see more buying activity by the hospitality REITs. Asia* Hotel Investment Volumes USD mil 2, 1,8 1,6 1,4 1,2 1, 8 6 4 2 28 Q1 28 Q2 28 Q3 28 Q4 29 Q1 29 Q2 29 Q3 29 Q4 21 Q1 21 Q2 21 Q3 21 Q4 211 Q1 211 Q2 211 Q3 211 Q4 212 Q1 212 Q2 USD mil 6, 5, 4, 3, 2, 1, Quarterly total (LHA) Rolling 4-Quarter total (RHA) Note: *The basket of markets includes China,, Indonesia, Japan, Malaysia,, South Korea, Taiwan, Thailand and Vietnam. Source: CBRE Research
MarketView Asia Hotels HOTEL DEMAND The most recent data published by PATA showed that international tourist arrivals to the Asia Pacific region went up by 4% y-o-y in the month of April 212. The pace of increase was slower compared to the 1% y-oy recorded in March. Southeast Asia was the fastest growing submarket with a 9% y-o-y rise in arrivals this April, bolstered by the recovery of arrivals in Thailand (+7%) and buoyant travel demand within the region. Tourist arrivals to were up by 9% while those to Cambodia (+24%), Myanmar (+35%) and the Philippines (+1%) grew considerably more due to the smaller base. The Chinese and Koreans are still the largest Asian source markets while the Russian Federation is emerging as a key source of visitors from Europe as is the UK. Northeast Asia reported a healthy increase in visitor arrivals of 5% led by growth in South Korea (+28%), Taiwan (+26%) and (+14%). The easing of restrictions on solo travel from the mainland helped boost Chinese tourist traffic to Taiwan. Meanwhile, South Korea looks to welcome 1.8 million visitors, surpassing forecasts for Japan (8 million) and Taiwan (7 million). International visitor arrivals to China rose by a modest 4% y-o-y in April. It is expected to welcome 6 million tourists this year after a record 57 million in 211. Japan is on track this year to break its 21 record of 8 million tourists. Japan s tourism market is making a strong comeback as tourist arrivals in April rebounded by 164% from a year ago. After a dismal 6.2 million in 211, it is on track this year to break its 21 record of 8 million tourists. A second low-cost carrier (LCC) Jetstar Japan was launched recently and will provide domestic and international services in Japan. This development bodes well not only for Japan but wider Northeast Asia, where progressive policies and support for LCCs have been few. Among the major Asian airports, Tokyo Narita recorded the largest percentage increase in passenger traffic movement in compared to the same period last year. The airport will build a JPY 5 billion terminal targeting LCCs by 215 which could increase its annual capacity of landings and take-offs to 3, from the current 25,. International Visitor Arrivals Evolution - Asia Pacific 2% 15% 1% 5% % -5% -1% -15% Source: CBRE Research, UNWTO May and June 212 are estimated International Visitor arrivals (in mil) China Malaysia Thailand South Korea Japan Indonesia Taiwan Vietnam H2 212 Forecast 1 2 3 4 5 6 Source: CBRE Research, WTO Forecast by National Tourism Offices Asia Busiest Airports by Passenger Traffic (change in %) Tokyo Narita Tourism growth in Asia is supported by the rapidly expanding LCC network within the region. In 212, passenger revenues for Asia Pacific s LCCs are estimated to grow by 23%, almost thrice that of traditional airlines. The Asia Pacific market is expected to account for nearly half of the world s air traffic with a forecast annual growth of 6.7%. By comparison, growth within North America and Europe is expected to be 2.2% and 3.5% respectively. Page 2 Tokyo Haneda % 1% 2% 3% Data calculated on compared to H1 211 Note: One passenger is described as someone who arrives in, departs from, or transfers through the airport on a given day. 212 statistics Source: CBRE Research; Airport Council International statistics
Future 4/5 Star Hotel Supply; 211-14 (# of rooms) Market Increase in stock (%) 211 214 27.6% 27.4% HCMC 23.2% 17.4% Kuala Lumpur 14.6% HOTEL SUPPLY According to STR, the Asia Pacific hotel development pipeline comprises 1,625 hotels totalling 374,64 rooms. Of this pipeline, the upscale segment accounts for the largest share at 24.7% (96,274 rooms) while the upper upscale segment accounts for 23.8% (89,325 rooms). The luxury and the unaffiliated segments account for 18.6% (69,812 rooms) and 15% (56,184 rooms) respectively. MarketView Asia Hotels 13.5% Jakarta 9.6% Seoul 9.% Shanghai 8.3% 2.9% 1.7%, and Ho Chi Minh City will add over 2% to their existing stock of 4/5 star hotel rooms by 214 end. Conversely, and will add no more than 3% to their stock in the next three years. Focus on Seoul Source: CBRE Research Seoul Future Hotel Room Supply (all segment) 9, 8, 7, 6, 5, 4, 3, 2, 1, 25 26 27 28 29 Note: 212-215 are forecast by CBRE Hotels Source: CBRE Research, Korea Tourism Organization 21 211 212 213 214 215 Korean Pop Culture, World Design Capital, UNESCO world heritage For these reasons and more, Seoul is becoming a highly sought-after tourist destination. As Chinese and Japanese tourists throng to Seoul, it is facing a supply crunch on hotel rooms. Domestic and international investors are looking to invest in Seoul s highly profitable hotel industry. Several chains like Shilla Group, Lotte Group, Hilton, Marriott, Intercontinental are planning to open up hotels over the next 2 years. Some 4 office buildings and shopping centres there have been approved to be converted into hotels to meet the shortfall. Between 212 and 215, about 7,14 rooms will be added to Seoul s hotel stock. This increase is still relatively modest. Hotel Occupancy 85% 75% 65% With the exception of and Shanghai, all the markets reported increases in occupancy in June from a year ago. Led by the recovery of inbound tourism, Tokyo hotel occupancy rose by 1.2 percentage points to 79.7% in June. Other markets that saw larger occupancy improvements were (66.4% to 71.8%), (64.9% to 69.7%) and (6.6% to 65.%). 55% 45% Dec-7 Jun-8 Dec-8 Jun-9 Dec-9 Jun-1 Dec-1 Jun-11 Jakarta Tokyo Dec-11 Jun-12 There was a slight dip in hotel occupancy by.7% points to 72.3% due to large supply increase in the past months. Meanwhile, Shanghai hotel market is still reeling from a substantial overhang of rooms that were built for the 21 Expo. Notwithstanding cyclical fluctuations, its hotel occupancy in June was similar to that 12 months ago at 58.6%. Kuala Lumpur Shanghai Seoul Note: Occupancy data calculated as MAT 12 month moving average total. Occupancy data for Ho Chi Minh City are not available. Competition is growing considerably across the region. Every hotel company is not only competing with major hotel chains in national and international venues but also with home-grown hotels in regional markets. Heightened competition and potential addition of new supply will restrict market share. Page 3
MarketView Asia Hotels HOTEL PERFORMANCE Average Daily Rate (ADR) of Asia Pacific hotels in H1 212 was US$143.7, which is 1.1% higher than in H1 211. Half-year RevPAR grew by 3.% to US$94.6 from a year ago. The latter had benefitted from the rise in half-year occupancy from 64.6% in H1 211 to 65.9% in. As at June 212, the three cities with the highest ADR in US$ terms were (US$248 or HK$1,355), (US$23 or S$296) and Seoul (US$185 or 213,47). Notably, Seoul hotel ADR was higher than in Tokyo. However, performance metrics of Tokyo hotels are expected to improve on the back of a demand recovery and intensive marketing activity from its national tourism organisation. Between January and June, all major Asian cities reported positive increases in ADRs except for (- 11.2%), Shanghai (-3.2%) and Kuala Lumpur (-.1%). The three markets with the largest percentage growth in ADRs were Jakarta (+16.1%), Seoul (+11.6%) and (+9.5%). Operators were able to take advantage of the current rising occupancies to drive up rates even more aggressively. ADR across Asia (in US$) 25 2 15 1 5 16 14 12 1 248 23 185 178 155 Seoul Tokyo 145 123 115 14 97 Note: ADR data calculated as MAT 12 month moving average total (from Jun-11 to Jun-12). HCMC data is not available Shanghai Kuala Lumpur Historic ADR Trends (Indexed 27 = 1) 9 Jakarta Over the last 6 months, Tokyo, reported the largest percentage increase in RevPAR of 27% from JPY9,15 to JPY11,622. This contrasts with a 43.% decrease over the same period last year due to the March- 11 event in Japan. After Japan, Jakarta saw the second highest increase of 18% growing from IDR563,214 to IDR667,254 within the first 6 months. After Tokyo and Jakarta, the three markets with the largest growth in RevPAR over the last 6 months were Seoul (+14.9% to KRW17,446), (+12.8% to CNY48) and (+9.7% to IDR92,697). These destinations not only benefitted from growing international arrivals but also from their large base of domestic tourists. Three markets experienced smallest percentage rise in RevPAR: (+1.6% to S$249); (+3.5% to HK$1,576) and (+4.2% to TW$3,166). Both and are highly open economies and are exposed to fluctuations in global demand including tourism demand. Nonetheless, our projected RevPARs still indicate a very busy year for these two hospitality markets. 8 6 27 28 29 21 211 Jakarta Tokyo Kuala Lumpur Shanghai Seoul RevPAR 6-month MAT Change Tokyo Jakarta Seoul Kuala Lumpur Shanghai -5% -3% -1% 1% 3% H1-212 H1-211 Page 4 RevPAR data calculated as MAT 6 month moving average total (for Jun-11 and Jun-12)
Hotel Investment Volumes (in US$ mil) USD mil 6, 5, 4, 3, 2, 1, 26 27 28 29 21 Source: CBRE Research, RCA 211 H1 211 HOTEL INVESTMENT Amid the global uncertainties and the Eurozone debt crisis, the hotel investment market remained active in, achieving US$2.3 billion worth of deals. Although investment volumes are 2% lower than in H1 211, the full year target is likely to be around $4-$5 billion which will surpass the annual volumes in 29 and 21. Investment volumes are likely to pick up in the second half of the year as several deals are currently in the final stages of negotiation. In, investors dominated the buying scene with purchases of around US$1 billion or 45% of Asian hotel transaction volume. Key acquisitions include Hilton Shanghai by Enerchina Holdings (US$33 million) and Novotel Kowloon by Gaw Capital & CSI Props Ltd (US$299.5 million). MarketView Asia Hotels Asia Investment Transactions by Buyer Origin Malaysia 5.5% South Korea 6.6% Vietnam 5.1% 5.4% Taiwan 9.8% China 4.9% Japan 18.% Thailand.3% Note: Others comprise Thailand, Indonesia, USA, Vietnam and India Source: CBRE Research, RCA Key Hotel Investment Transactions Hotel Location 45.2% Approx Sale Price Hilton Shanghai China US$ 33 mil Novotel Kowloon US$ 35 mil Tokyu Plaza Akasaka Japan US$ 288 mil Imperial Hotel Taiwan US$ 157 mil Four Seasons Guangzhou China USS 141 mil Banyan Tree Club & Spa Seoul South Korea US$ 14 mil Hanoi Daewoo Hotel Vietnam US$ 114 mil Mövenpick Resort Beach Phuket Thailand US$ 91 mil Two hotels were injected into REITs by developers and sponsors. These include Tokyu Plaza Akasaka into Activia Properties and Four Seasons Guangzhou into Yuexiu REIT. A major cross-border deal in was the sale of Mövenpick Resort Beach Phuket to KL-based TA Global Berhad for US$91 million. Looking ahead, more buzz is expected in the hotel investment market as existing REITs grow in size and some hospitality REITs are awaiting to be listed. The hotel investment markets in Asia remains tightly held, especially in and. Meanwhile, some hotel owners in Thailand and Vietnam are said to be exiting and redeploy their capital elsewhere. Looking ahead, more buzz is expected in the hotel investment market as existing REITs grow in size and some new hospitality REITs are awaiting to be listed. Ascendas Hospitality Trust (A- HTrust), a stapled security has recently raised over S$7 million to fund its portfolio of 1 hotels across Asia. On July 3 th Accor sold its stake in Mirvac Wholesale Fund and the Novotel/ibis Sanyuan in to A-HTrust for a total amount of 11m. The A-HTrust is reportedly offering investors attractive yields of 7.9%-8.%. Meanwhile, Far East REIT could raise some S$7 million in a public listing in August. Sponsored by Far East Organization, the REIT s initial portfolio will include seven hotels and four serviced residences, all of which are in. Source: CBRE Research, RCA Page 5
COUNTRY HIGHLIGHTS & Jakarta, INDONESIA Existing chain players, e.g. Accor, Aston and Kompas Group have expanded their Indonesian businesses while new foreign players such as Red Planet Hotels are planning to open several hotels to tap on the growing tourism industry. & Phuket, THAILAND There is strong demand for hospitality assets in Phuket and where hotels are performing particularly well compared to elsewhere in the country. However, competition from the additional future supply might affect the performance of existing hotels. HONG KONG SAR recorded a busy as buying activity revived after the Chinese New Year period. Owner-occupiers and high-networth individuals accounted for the bulk of completed deals. Ho Chi Minh City, VIETNAM Although slower economic growth is forecasted for the second half of the year, the current overall economy is more stable compared to 211. There will continue to be opportunities for international investors to form joint venture projects with Vietnamese developers. Definitions ADR Average Daily Rate ( ADR ) is a ratio that indicates the average price for one overnight stay at a hotel. It is calculated by dividing total rooms revenue by the number of rooms occupied. AOR Average Occupancy Rate ( AOR ) is calculated by dividing Rooms Occupied by Rooms Available. Complimentary rooms are not included in the Rooms Occupied. RevPAR Revenue Per Available Room ( RevPAR ) is the total hotel room revenue divided by the total rooms available to rent for a day or range of dates. Asia markets The basket of markets that we cover in the Asia Hotels MarketView include China,, Indonesia, Japan Malaysia,, South Korea, Taiwan, Thailand, Vietnam. Kuala Lumpur, MALAYSIA Investor sentiment remains upbeat despite recent economic worries and concerns over potential oversupply in Kuala Lumpur. The government s liberalisation policies and tax incentives have helped increase domestic and foreign investments in hospitality assets across Malaysia. & Shanghai, CHINA Whilst there is concern regarding oversupply in some market segments and submarkets of selected tier II cities, investor interest remains firm. Cash rich buyers who do not require financing, particularly State Owned Enterprises, are likely to be active players. SINGAPORE The recent instability in world economies had little impact on investor sentiments concerning hotel assets and may even enhance buying interest, as the island state is viewed as a strong, stable and transparent economy to invest in. Seoul, SOUTH KOREA The outlook for the Seoul hotel market is positive considering the strong growth forecast of outbound Chinese tourists which will lead to an increase in hotel room demand. With limited supply forecast over the next 6 months, existing market players will continue to benefit from high occupancy rates and increasing ADRs. 212 CBRE Disclaimer, TAIWAN A referendum held in Taiwan s offshore island group of Matsu had supported government plans to build a casino. Major names in the gaming industry are already reported to be planning casino resorts on the islands. Tokyo, JAPAN Reconstruction and recovery efforts have led to increased corporate activity in the city. Domestic demand and corporate business have returned to pre-disaster levels, and international leisure travellers are less hesitant to go to Tokyo. The 212 outlook for Tokyo hotels remains very positive. This report was prepared by CBRE Hotels and CBRE s Research Team, which forms part of CBRE Global Research and Consulting - a network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to investors and occupiers around the globe. Hotel Contacts Robert McIntosh Executive Director - Asia Pacific Tel: +65 6326 12 Email: robert.mcintosh@cbre.com Julien Naouri Manager Asia Pacific Tel: +65 6326 1674 Email: julien.naouri@cbre.com.sg Research Contact Petra Blazkova Head of Research - & SEA Tel: +65 6326 1297 Email: petra.blazkova@cbre.com.sg Gerald Lim Associate Director - Tel: +65 326 1659 Email: gerald.lim@cbre.com.sg This report has been prepared solely for general informative purposes. The information contained herein has been derived fromsources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the market. They are subject to change without notice and transactions should not be entered into in reliance upon the information, opinions and estimates set out herein. All rights reserved. No part of this publication may be reproduced in any form without prior written permission of CBRE Pte. Ltd,. MICA (P) 34/7/211