MARKETVIEW Asia Pacific Hotels, H2 2018 Hotel market sentiment remains upbeat on the back of healthy tourism growth 2018 ADR US$104.5 2018 Occupancy 49 bps 2018 RevPAR US$74.1 2018 Investment Volume US$12.4 Bn* *Includes deals worth more than US$10m each, and excludes related-party transactions. HOT TOPICS Hotel occupancy increased by 49 basis points y-o-y to 71% in 2018, supported by healthy growth in international tourism arrivals. Markets registering occupancy of more than 80% included consistent performers such as Melbourne, Sydney, Tokyo, Osaka, Singapore and Hong Kong. ADR rose to US$104.5 in 2018, representing y-o-y growth of 2.8%. Combined with occupancy of 71%, this resulted in RevPAR growth of 3.3%, much higher than the 1.9% recorded in 2017, capping off a positive year for the regional hotel market. Hotel transaction volume registered US$12.1 billion in 2018, a rise of 6.4% y-oy. China, Japan, Australia, Hong Kong and Singapore all reported steady investment turnover on the back of strong demand from domestic and overseas investors. Healthy tourism sector fundamentals will ensure the Asia Pacific hotel investment market performs well in 2019. Weak transaction activity in many markets is largely due to the absence of high quality assets for sale, rather than a lack of buyers. CBRE expects to see more opportunities emerge for investors in 2019. ECONOMIC GROWTH MODERATES The World Bank has revised down global economic growth to 3% for full year 2018, with growth expected to moderate further to 2.9% in 2019. In Asia Pacific, major headwinds including U.S.- China trade conflict, interest rate uncertainty and financial market volatility are set to result in weaker economic growth of 4.2% in 2019, down from 4.8% in 2018. The late-stage market cycle and softer global growth prospects had a negative impact on investor sentiment and equity prices in H2 2018. While U.S.-China trade conflict remains a key downside risk, negotiations between the two countries are progressing well and there are hopes for a breakthrough in the coming months. TOURISM ARRIVALS REMAIN ROBUST UNWTO data show international tourist arrivals rose by 6% in 2018 to 1.4 billion. Growth was mainly driven by the favourable economic environment and strong outbound demand from major tourism source markets. The UNWTO Panel of Tourism Experts survey findings indicate considerable confidence in the global tourism outlook for 2019 on the back of strong performance in many destinations. H2 2018 CBRE Research CBRE Ltd. 2019 1
VIETNAM AND KOREA REPORT STRONG ARRIVALS Figure 1: Growth of International Visitor Arrivals by Region Vietnam recorded the strongest tourist arrivals growth in Asia Pacific in 2018. Arrivals grew 19.9% y-o-y on the back of increased participation in tourism trade fairs, marketing on social networks, the pilot implementation of electronic visas for 40 countries and visa exemptions for five Western European countries. Closely behind was Korea, which received a total of 15.3 million visitors during 2018, representing 15.1% y-o-y growth over 2017, when there was a dip in international arrivals. Growth was driven by the Winter Olympics and related visa free privileges to several countries including the Philippines, Indonesia and Vietnam. Improved diplomatic relations with China also resulted in the recovery of Chinese arrivals. Growth in tourist arrivals (%) 9.00% 7.00% 5.00% 3.00% 1.00% (1.00)% (3.00)% (5.00)% 2016 2017 2018 Source: UNWTO, CBRE Hotels Figure 2: Growth of International Visitor Arrivals (2018 vs. 2017) World Europe APAC Americas Africa Middle East Indonesia received 15.8 million visitors in 2018, equivalent to growth of 14.3% y-o-y. Although the official goal of 17 million visitors was not met, partly due to the impact of earthquakes and a tsunami in Lombok, tourism revenue for 2018 increased to US$17.6 billion, well in excess of official targets. HOTEL OCCUPANCY IMPROVES SLIGHTLY Asia Pacific hotel occupancy increased by 49 basis points y-o-y to 71% in 2018, supported by healthy growth in international tourism arrivals. Markets registering high occupancy of more than 80% during 2018 included consistent performers such as Melbourne, Sydney, Tokyo, Osaka, Singapore and Hong Kong. Vietnam Korea Indonesia Japan Thailand Singapore Australia Hong Kong New Zealand Taiwan 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% Source: Respective Tourism Authorities, CBRE Hotels Figure 3: Hotel Occupancy in Top Three markets in Asia Pacific in 2018 90% 85% These locations are mature markets that often reach full capacity and operate at above 80% occupancy with minimal fluctuations. Their continued robust performance also reflects strong market fundamentals, ensuring that hotel demand continues to expand at a much faster rate than supply. Occupancy (%) 80% 75% 70% Hong Kong SAR Tokyo Osaka H2 2018 CBRE Research CBRE Ltd. 2019 2
LOCAL CURRENCY ADR REMAINS RESILIENT Figure 4: ADR Across Top 3 markets (US$) 12 months in 2018 Asia Pacific hotels recorded an ADR of US$104.5 in 2018, representing y-o-y growth of 2.8%. Combined with occupancy of 71%, this resulted in RevPAR growth of 3.3%, much higher than the 1.9% recorded in 2017, capping off a positive year for the regional hotel market. Several markets continued to face downside risks including potential oversupply or competition from online booking platforms. Currency fluctuation has also dragged on growth, meaning that any analysis of hotel performance in USD terms should treated with caution. In local currency terms, several markets recorded either slower growth or in the case of Osaka, Sydney and Seoul, slight declines on a y-o-y basis. HONG KONG LEADS REVPAR GROWTH Solid ADR growth in correlation to rising occupancy resulted in strong RevPAR growth in Hong Kong, Jakarta and Bangkok in 2018. Hong Kong achieved significant RevPAR growth of 10.0% y-o-y in local currency terms, reflecting continued solid demand from Chinese tourists. The recent completion of new infrastructure including the Guangzhou-Hong Kong High Speed Train and the Hong Kong-Macau-Zhuhai Bridge is expected to continue driving hotel demand. Strong RevPAR performance in Bangkok was partly due to weaker growth in new supply. Elsewhere, Jakarta s hosting of the Asian Games significantly contributed to impressive RevPAR growth. TOURISM OUTLOOK REMAINS BRIGHT The UNWTO expects international tourism arrivals to grow by 3.0% to 4.0% in 2019. Among the different regions, growth is expected to be strongest in Asia Pacific, at 5.0% to 6.0%. CBRE expects this to translate into improved trading conditions across regional hotel markets. ADR (USD) Percentage Change (%) Percentage Change (%) 205.00 200.00 195.00 190.00 185.00 180.00 175.00 170.00 165.00 160.00 155.00 Figure 5: Change in Local ADR 12 months through 2018 Y-o-Y Figure 6: Change in Local RevPAR 12 months through 2018 Y-o-Y 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% Singapore Hong Kong SAR Tokyo Hong Kong SAR Ho Chi Minh City Bangkok Hong Kong SAR Jakarta Bangkok H2 2018 CBRE Research CBRE Ltd. 2019 3
SINGAPORE RECORDS STRONG PERFORMANCE VIETNAM HOTELS REPORT SOLID PERFORMANCE Healthy growth in visitor arrivals and limited new hotel supply ensured Singapore continued to perform well in 2018, recording a 2.4% y-o-y increase in RevPAR. The Vietnam tourism market continues to flourish, with international arrivals increasing by 19.9% y-o-y in 2018, led by the growth of Chinese and Korean visitors. Arrivals are expected to grow at a healthy rate this year, supported by marketing campaigns and the introduction of new and revamped attractions, and will support continued solid trading performance. The number of hotel sales is expected to pick up as market sentiment strengthens. Arrivals are also being facilitated by improvements to infrastructure, tourism development initiatives and partnerships with the private sector. The outlook for arrivals remains bright, with key markets such as Ho Chi Minh City expected to perform well as a result of limited new supply. INBOUND DEMAND INCREASES IN JAPAN Japan received 31.2 million international visitors in 2018 and is on target to pass the 40 million mark in 2020. Robust inbound demand continues to support hotel market performance, with arrivals set to continue increasing even after the Tokyo Olympics/Paralympics in 2020. The coming years will see the introduction of niche hotel brands such as Innside by Melia, La Siesta and E Central, a trend expected to induce additional demand by creating greater destination awareness of the overall Vietnam hospitality market. GOLD COAST LEADS AUSTRALIAN MARKETS In addition to the strong performance of the three major hotel markets of Tokyo, Osaka and Kyoto, regional cities such as Sapporo, Nagoya and Fukuoka are reporting high occupancy and impressive RevPAR growth. CBRE believes these markets require an increase in rooms equivalent to 18%, 31% and 30% of existing stock, respectively, in order to meet growth in demand. RevPAR growth in major Australian hotel markets increased by 1.2% y-o-y in 2018, slower than the 2.8% y-o-y growth recorded in 2017. The slowdown in RevPAR growth reflected downward pressure on occupancy in a number of markets amid a series of new hotel openings and a decline in domestic visitors, suggesting that some markets may have peaked. ARRIVALS SET NEW RECORD IN THAILAND Thailand welcomed 38.3 million international visitors in 2018, marking a y-o-y increase of 8.2% and setting a new record for annual arrivals. The year s strong performance also demonstrated the resilience of the tourism industry after a major boating accident in Phuket led to a slowdown in Chinese arrivals in H2 2018. Supported by visa exemptions, reduced visa charges, new flights and continued growth from within Asia, the Thai hotel market continued to perform well, achieving 14.2% y-o-y growth in RevPAR in 2018. However, the Gold Coast continued to perform well, recording RevPAR growth of 9.4% on the back of its hosting of the Commonwealth Games in April 2018. The supply of new high-end hotels in Australia is expected to increase over the next three years and comes at a time when economic growth is expected to soften. Hobart, Adelaide and Perth all have a large development pipeline between 2019 to 2021, which is set to exert pressure on hoteliers to reduce room rates to fill occupancy. CBRE therefore expects these markets to be at risk of RevPAR declines. H2 2018 CBRE Research CBRE Ltd. 2019 4
HOTEL INVESTMENT INCREASES SLIGHTLY SOLID INTEREST BUT FEWER DEALS IN AUSTRALIA Asia Pacific hotel transaction volume registered US$12.4 billion in 2018, a rise of 6.4% y-o-y. China, Japan, Australia, Hong Kong and Singapore all reported steady investment turnover on the back of strong demand from domestic and overseas investors. High transaction volume in China was mainly due to the sale of Dalian Wanda Group s hotel portfolio of 73 domestic hotels to Guangzhou R&F Properties for approximately RMB 17.5 billion in H1 2018. Several other major China hotel portfolios also changed hands in 2018 including the Ascott Residence Trust China Hotel portfolio, the Banyan Tree China Hotel portfolio, the Ascendas Hospitality Beijing portfolio and the Gaw Capital Beijing portfolio. Local and overseas investors retained a strong interest in Japan, driven by improving market fundamentals and growth in tourism demand. Acquisitions were largely dominated by domestic investors, many of which are increasingly focusing on regional assets amid continued low returns in Tokyo. Activity in Australia remained limited in 2018 compared to previous years despite a surge in sales volume in Q4 2018, which saw the completion of AUD 600 million-worth of deals. The lower sales volume is partly a result of weaker Chinese investment due to capital restrictions. Activity in Queensland and Western Australia increased as economic performance improved, but fewer deals were recorded in New South Wales market as owners remained reluctant to sell. Major transactions in Australia included the Aloft Perth by BGC to Singaporean real estate group Hiap Hoe for AUD 40 million; the Westin Perth to YTL Corp Bhd for AUD 180 million; and the Accor Portfolio comprising the 177-room Novotel Sydney Olympic Park, 212-room Pullman at Sydney Olympic Park and 144-room Ibis Sydney Olympic Park to French group AXA Investment Managers. These deals reflected continued strong interest in Australia from overseas groups, with any trophy assets for sale expected to garner considerable interest. Figure 7: Asia Pacific Hotel Transaction Volume 14,000 50.0% 12,000 40.0% 10,000 30.0% 20.0% USD (Millions) 8,000 6,000 4,000 10.0% 0.0% -10.0% -20.0% % Growth 2,000-30.0% 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 Asia Pacific % Growth -40.0% Source: RCA, CBRE, December 2018 *Including transactions that are worth more than 10 million USD each, and excluding related-party transactions H2 2018 CBRE Research CBRE Ltd. 2019 5
SINGAPORE REPORTS INCREASE IN HOTEL DEALS ASIA PACIFIC RESEARCH Eight hotel investment deals representing a transaction volume of SGD 518.7 million were completed in Singapore in 2018, the highest total since 2015. Most deals were small mid-tier and economy assets along with boutique shophouse hotels including the 84-key Porcelain Hotel, the 41-key Wangz Hotel and the 29-key Wanderlust Hotel. More investors are considering diversifying into the hotel sector in Singapore following the introduction of residential cooling measures in July 2018 and revised guidelines issued by the Urban Redevelopment Authority. Buying sentiment among domestic and foreign investors is to likely to remain strong due to Singapore s solid fundamentals. ACTIVITY REMAINS LIMITED IN HONG KONG In Hong Kong, deal flow was limited as quality assets remained tightly-held and high prices and low yields continued to deter many investors. However there was some activity involving purchases of development land and smaller hotels or serviced apartments that can be redeveloped into offices. Major transactions in H2 2018 included Hanison Construction s HKD 730 million purchase of the Citadines Harbourview Hong Kong from CapitaLand. POSITIVE OUTLOOK FOR 2019 Henry Chin, Ph.D. Head of Research, Asia Pacific +852 2820 8160 henry.chin@cbre.com.hk CBRE HOTELS Robert McIntosh Executive Director; CBRE Hotels Asia Pacific +65 6326 1200 robert.mcintosh@cbrehotels.com Zhang Jiahao Manager, Asia; CBRE Hotels Asia Pacific +65 6326 1674 Jiahao.zhang@cbrehotels.com Wee Ting Ting Senior Analyst, CBRE Hotels Asia Pacific +65 6328 1336 Tingting.wee@cbre.com To learn more about CBRE Hotels, or to access additional research reports, please visit CBRE Hotels website at http://www.cbrehotels.com/en/pages/home.aspx To learn more about CBRE Global Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/research-and-reports Healthy tourism sector fundamentals will ensure the Asia Pacific hotel investment market performs well in 2019. Weak transaction activity in many markets is largely due to the absence of high quality assets for sale, rather than a lack of buyers. CBRE expects to see more opportunities emerge for investors in 2019. Disclaimer: Information contained herein, including projections, has been obtained from sources 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 confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. Agency Licence No.: L3002163I