TM Hotel, Tourism and Leisure Asia Pacific Quarterly Update Volume 3 Spotlight: Malaysia ASIA PACIFIC QUARTERLY UPDATE VOL.2
ASIA PACIFIC HOTEL REVIEW HOTELS OPENED Singapore Philippines Malaysia Laos South Korea Source: Horwath HTL Japan 7% Thailand 8% Indonesia 15% Vietnam Australia 7% India 11% China 30% Fiji Total hotel openings by international hotel management companies increased by 51% in Q2 2014 in Asia Pacific, as compared to the same period in 2013. The 53 openings this quarter, combined with 42 openings witnessed last quarter, brings the year to date total to 95 hotels, an increase of 36% when compared to H1 2013. With regards to the number of rooms, year to date performance shows a 2 increase in openings, from 16,968 hotel rooms opened H1 2013 to 21,015 rooms in H1 2014. Continuing the trend witnessed in the first quarter of 2014, the majority of hotels (81%) are opening under a management agreements with only 19% of hotels opening under a franchise agreement. Recent trends show that new hotel openings in Asia are predominately new build hotels and the same is true this quarter with almost three quarters (7) of the hotels considered new builds. China continued to dominate as the most popular location for new hotel opening, accounting for 30% of all hotels openings, while the number of openings in Australia decreased by 11% when compared to the same quarter in 2013. This quarter also saw an opening in Fiji, the first hotel opening seen in this location for some time. NUMBER OF HOTELS NUMBER OF ROOMS 2013 2014 % CHANGE 2013 2014 % CHANGE Q1 35 42 20% 8,736 10,579 21% Q2 35 53 51% 8,232 10,436 27% H1 70 95 36% 16,968 21,015 2 PAGE 2 ASIA PACIFIC QUARTERLY UPDATE VOL.3
ASIA PACIFIC HOTEL REVIEW HOTEL DEAL SIGNINGS Malaysia 1% South Korea 6% Source: Horwath HTL Philippines 1% Singapore New Zealand 1% Myanmar Laos Indonesia 13% India Taiwan Vietnam Thailand 3% Australia 3% Bhutan 1% China Deal signings decreased by 6% the second quarter of 2014 when compared to Q2 2013. With a decrease also witnessed in Q1 2014, there has been an overall decrease of for H1 2014 when compared to H1 2013. In terms of the number of rooms, Q2 saw a decrease of when compared to the same period in 2013. Taking into account the 1 decrease in rooms recorded in Q1 2014 and the number of rooms signed in H1 2014 has decreased by 7% when compared to H1 2013. More than half () of the deal signings in Q2 2014 were for hotels located in China. Indonesia continued to prove a popular location accounting for 13% of all new signings, only showing a marginal decrease when compared to the 15% seen in Q2 2013. Notably, there was signing activity in Singapore, with two hotel deals. The most recent Singapore deals signed prior to these were back in 2011. The majority of signings are management agreements with only 20% of deals as franchise agreements. The franchise model proves to be most popular in the South Korea and India markets. The type of property, in terms of conversion or new build was more varied in Q2 2014, where of new deals signed were for new build properties compared to the 90% for new build signings seen in Q2 2013. Source: Horwath HTL NUMBER OF HOTELS NUMBER OF ROOMS 2013 2014 % CHANGE 2013 2014 % CHANGE Q1 132 128-3% 33,514 29,623-1 Q2 113 106-6% 25,837 25,296 - H1 245 234-59,351 54,919-7% Note: Deal signing refers to management and franchise agreements signed by the international hotel management companies. PAGE 3 ASIA PACIFIC QUARTERLY UPDATE VOL.3
MALAYSIA HOTEL DEAL OPENINGS The Malaysian Market is a steady market, with at least one new opening and signing each quarter. After a slow start to 2014, hotel openings doubled in Q2 2014 with the opening of two hotels compared to only one hotel in Q2 2013. This corresponds to an increase of 35% in the number of rooms over the same period. Comparing the hotel opening performance year to date, H1 2014 recorded a increase in openings compared to H1 2013, however the number of rooms opened has fallen by 29%. The average number of rooms per property has decreased from 414 rooms in H1 2013 to 195 in H2 2013. The focus seems to have shifted somewhat from the capital of Kuala Lumpur to regional destinations such as Johor (Iskandar), Penang, Langkawi, Melaka and Kota Kinabalu. The issue of land titles continues to hamper hotel development in Langkawi that is experiencing pent-up demand for mid-tier and top-tier hotels. With the opening of the second bridge connecting the peninsula and Penang Island, and the re-emergence of George Town as an international destination, market expectations are for an increase openings and signings of new hotels in the coming years. In Johor, the continuing development of Nusajaya, Medini and Danga Bay, as well as the Desaru coast in eastern Johor, is attracting plenty of attention from hotel developers and more announcements are expected in the coming years. NUMBER OF HOTELS NUMBER OF ROOMS 2013 2014 % CHANGE 2013 2014 % CHANGE Q1 1 1 0% 482 119 - Q2 1 2 100% 345 466 35% H1 2 3 827 585-29% Source: Horwath HTL PAGE 4 ASIA PACIFIC QUARTERLY UPDATE VOL.3
MALAYSIA HOTEL DEAL SIGNINGS 2013 was a good year for hotel signings, 16 deals comprising of 3,499 rooms were signed across Malaysia. After a promising start to 2014, signing activity slowed in the second quarter of 2014. The number of hotels deals signed declined by 80%, when compared to Q2 2013 and looking performance over the first half of the year, the number of deals signed has dropped by 38%, from 8 deals seen in H1 2013 to only five deals in H1 2014. As a result of only one new signing the number of new rooms dropped by during the same period. Despite the significant number of rooms signed during the first quarter of the year, the year to date performance is down by 20% when compared to H1 2013. The new deal signing for Q2 2014 is for a 300 room hotel in the once popular resort of Desaru Beach. The resort area is currently being regenerated and we expect to see more hotel opening and signing activity in this area in the future. The planned massive Pengerang Oil & Gas complex and enclave south of Desaru is expected to induce more hotel openings post 2018. Source: Horwath HTL NUMBER OF HOTELS NUMBER OF ROOMS 2013 2014 % CHANGE 2013 2014 % CHANGE Q1 3 4 33% 405 991 145% Q2 5 1-80% 1,214 300 - H1 8 5-38% 1,619 1,291-20% PAGE 5 ASIA PACIFIC QUARTERLY UPDATE VOL.3
ASIA PACIFIC HOTEL MARKET REVIEW HOTEL OCCUPANCY AND ADR Philippines (+3.), China (+3.0%) and Australia (+2.7%) experienced the strongest increase in occupancy June 2014 YTD within the region, while Thailand (-17.), Vietnam (-2.9%) and French Polynesia (-1.7%) declined in this measure. $180 $160 $140 $120 $100 Occ YTD 2013 Occ YTD 2014 ADR YTD 2013 ADR YTD 2014 Maldives showed the strongest growth in average daily rate (ADR, +13.6%), measured in local currency, resulting in the strongest growth in revenue per available room (RevPAR, +13.5%) of all countries within this region compared to June 2013 YTD. Indonesia (+10.5%) and Japan (+8.6%) came second and third in terms of ADR growth, while China (-3.5%) and India (-3.) were the only countries within the region posting declines in this measure. The constant growing supply continued to impact the ADR performance for China and India. Albeit demand is up, resulting in a positive occupancy trend for both countries. $80 $60 $40 HOTEL PERFORMANCE ACROSS SELECTED MARKETS $250 $230 $210 $190 $170 $150 $130 $110 $90 Asia Pacific Central & South Asia Northeastern Asia Southeastern Asia Australia & Oceania Occ YTD 2013 Occ YTD 2014 ADR YTD 2013 ADR YTD 2014 90% 85% 80% Delhi-NCR (-6.) and Mumbai (-4.3) have experienced the biggest drop in ADR within the region, measured in the respective local currency. Bangkok (-26.) continued to report the most significant decline in hotel performance of all markets, solely driven by a drop in occupancy due to on-going political unrest, while Osaka (+18.7%) and Bali (+15.5%) were the top markets in terms of RevPAR growth. PAGE 6 ASIA PACIFIC QUARTERLY UPDATE VOL.3
ASIA PACIFIC HOTEL MARKET REVIEW UNDER CONTRACT ROOM PIPELINE BY SCALE China (+290k rooms) remains the country with the strongest under contract room pipeline, followed by India (+58k rooms) and Indonesia (+54k rooms). 15% 16% Luxury In the coming years, more than 2,300 hotels with +520k rooms are expected to enter the region The Upscale class currently is expected to grow the fastest, followed by Upper Upscale and Luxury. 5% 11% 23% Upper Upscale Upscale Upper Midscale Midscale Economy Independent YTD 2014, room supply for the Luxury class grew strongest (+5.0%), followed by Midscale and Economy class (+4.3%) and Upscale class (+3.6%). 28% UNDER CONTRACT ROOM PIPELINE BY COUNTRY 1 11% 3% 3% 3% China India Indonesia Malaysia 8% 1% Thailand Philippines Japan Vietnam 59% Australia South Korea PAGE 7 ASIA PACIFIC QUARTERLY UPDATE VOL.3
SPOTLIGHT: MALAYSIA June 2014 YTD, Malaysia reported a positive trend in occupancy and ADR, resulting in a double digit RevPAR growth to MYR264.85 (+10.), mainly driven by the growth in rate. June (-3.9%) experienced the first decline in hotel performance of all months in 2014, as declining demand lead to notable falls in occupancy, which mainly was driving the decrease in RevPAR. JUNE 2013 YTD JUNE 2014 YTD % CHANGE Occupancy 65.9% 67.3% +2. ADR MYR 365 MYR 393 +7.8% RevPAR MYR 240 MYR 265 +10. ADR rolling 12 RevPAR rolling 12 Occupancy rolling 12 MYR 450 80% MYR 350 MYR 250 MYR 150 MYR 50 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun HOTEL PERFORMANCE BY CLASS The Upscale class in Malaysia experienced the strongest increase in ADR (+9.8%) of all classes, as well as the most significant growth in occupancy (+6.5%). The Upper Midscale class was the only class reporting declines in ADR (-0.7%) and occupancy (-1.) of all segments, while Upper Upscale class only declined in occupancy (-1.8%). Upper Upscale (+6.3%) and Upscale (+2.8%) saw the strongest supply growth of all classes, while demand for Luxury grew by +5.6%, and for Midscale and Economy +3.1%. HOTEL PERFORMANCE BY MARKET All markets in Malaysia experienced an increase in occupancy and ADR. Sarawak/ Sabah reported the strongest increase of all markets in both occupancy (+3.0%) and rate (+12.8%). Langkawi managed to maintain the highest rates of all markets and reported an increase of this measure by +8.0%. Kuala Lumpur was the only market reporting occupancy levels above (+2.8%), however, ADR increased by only +4., the lowest growth in this measure of all markets. OCCUPANCY & ADR LEVELS BY MARKET MYR 800 MYR 700 MYR 600 MYR 500 REVPAR LEVELS BY MARKET MYR 500 MYR 450 MYR 350 MYR 250 MYR 150 MYR 50 Occ YTD 2013 Occ YTD 2014 ADR YTD 2013 ADR YTD 2014 Kuala Lumpur Langkawi Malaysia Peninsular Area Sarawak Sabah RevPAR YTD 2013 RevPAR YTD 2014 Kuala Lumpur Langkawi Malaysia Peninsular Area Sarawak Sabah Occ YTD 2013 Occ YTD 2014 ADR YTD 2013 ADR YTD 2014 MYR 700 MYR 600 MYR 500 45% Luxury Upper Upscale Upscale Upper Midscale Midscale & Economy 40% PAGE 8 ASIA PACIFIC QUARTERLY UPDATE VOL.3
SPOTLIGHT: KUALA LUMPUR MYR 450 MYR 350 MYR 250 MYR 150 MYR 50 ADR rolling 12 RevPAR rolling 12 Occupancy rolling 12 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Kuala Lumpur showed positive growth for both occupancy (+2.8%) and ADR (+4.) June 2014 YTD, resulting in the highest RevPAR levels (MYR295.07) for this time period since 1994, when STR Global began collecting hotel performance for the country. 85% 80% Demand growth for the Malaysian capital slowed in May (+4.8%) relative to previous months, and declined in June (-3.3%), also impacted by the bad publicity around Malaysia airlines, with its key role connecting major destinations around the world with Kuala Lumpur International Airport. HOTEL PERFORMANCE BY CLASS MYR 600 MYR 500 Occ YTD 2013 Occ YTD 2014 ADR YTD 2013 ADR YTD 2014 85% 80% 45% Luxury Upper Upscale Upscale Kuala Lumpur showed positive growth for both occupancy (+2.8%) and ADR (+4.) June 2014 YTD, resulting in the highest RevPAR levels (MYR295.07) for this time period since 1994, when STR Global began collecting hotel performance for the country. 40% Demand growth for the Malaysian capital slowed in May (+4.8%) relative to previous months, and declined in June (-3.3%), also impacted by the bad publicity around Malaysia airlines, with its key role connecting major destinations around the world with Kuala Lumpur International Airport. PAGE 9 ASIA PACIFIC QUARTERLY UPDATE VOL.3
SPOTLIGHT: REGIONAL MALAYSIA REGIONAL MALAYSIA HOTEL PERFORMANCE BY CLASS Occ YTD 2013 Occ YTD 2014 ADR YTD 2013 ADR YTD 2014 MYR 700 80% MYR 600 MYR 500 40% 30% 20% 10% Luxury Upper Upscale Upscale 0% Upscale class showed the strongest increase in both ADR (+15.0%) and occupancy (+7.3%), indicating a strong double digit RevPAR growth to MYR200.24 (+23.3%) Upper Upscale reported the second strongest increase in ADR (+9.7%) of all classes. But at the expense of occupancy, which declined by -1.6% to 62.. SPOTLIGHT: REGIONAL MALAYSIA EXCL LANGKAWI ADR rolling 12 RevPAR rolling 12 Occupancy rolling 12 MYR 350 MYR 250 MYR 150 MYR 50 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 68% 66% 6 6 58% 56% 5 5 Kuala Lumpur showed positive growth for both occupancy (+2.8%) and ADR (+4.) June 2014 YTD, resulting in the highest RevPAR levels (MYR295.07) for this time period since 1994, when STR Global began collecting hotel performance for the country. Demand growth for the Malaysian capital slowed in May (+4.8%) relative to previous months, and declined in June (-3.3%), also impacted by the bad publicity around Malaysia airlines, with its key role connecting major destinations around the world with Kuala Lumpur International Airport. PAGE 10 ASIA PACIFIC QUARTERLY UPDATE VOL.3
SPOTLIGHT: REGIONAL MALAYSIA MALAYSIA UNDER CONTRACT* PIPELINE Malaysia currently has 500+ hotels with 115k+ rooms and experienced an increase in supply by +4.1% in June 2014 YTD. In particular the classes Upper Upscale (+6.3%) and Upscale (+2.8%) showed the largest growth With an under contract rooms pipeline of +18.0% on top of the existing supply, Malaysia has the fourth largest pipeline within APAC after China, India, and Indonesia. IN CONSTRUCTION FINAL PLANNING PLANNING MALAYSIA 39 14 34 KUALA LUMPUR 6 7 7 MALAYSIA PENINSULAR AREA 23 4 23 SARAWAK/ SABAH 8 3 4 OTHERS 2 0 0 MALAYSIA UNDER CONTRACT* ROOM PIPELINE BY CHAIN SCALE 1 33% Luxury 1 Upper Upscale Upscale Upper Midscale Midscale Economy 1% 21% Independent 13% 8% * Under Contract includes projects currently under construction, in final planning- or planning phase. PAGE 11 ASIA PACIFIC QUARTERLY UPDATE VOL.3
HORWATH HTL CONTACT DETAILS ASIA PACIFIC AUCKLAND, NEW ZEALAND auckland@horwathhtl.com BANGKOK, THAILAND ishweder@horwathhtl.com BEIJING, CHINA beijing@horwathhtl.com HONG KONG, SAR hongkong@horwathhtl.com JAKARTA, INDONESIA jakarta@horwathhtl.com KUALA LUMPUR, MALAYSIA kl@horwathhtl.com MUMBAI, INDIA vthacker@horwathhtl.com SHANGHAI, CHINA shanghai@horwathhtl.com SINGAPORE, SINGAPORE singapore@horwathhtl.com SYDNEY, AUSTRALIA jsmith@horwathhtl.com TOKYO, JAPAN tokyo@horwathhtl.com AFRICA CAPE TOWN, SOUTH AFRICA capetown@horwathhtl.com LATIN AMERICA BUENOS AIRES, ARGENTINA cspinelli@horwathhtl.com SÃO PAULO, BRAZIL mcarrizo@horwathhtl.com MEXICO CITY, MEXICO mjgutierrez@horwathhtl.com DOMINICAN REPUBLIC sotero.peralta@crowehorwath.com.do SANTIAGO, CHILE cspinelli@horwathhtl.com BOGOTA, COLOMBIA mjgutierrez@horwathhtl.com EUROPE AMSTERDAM, NETHERLANDS info@horwathhtl.com ANDORRA LA VELLA, ANDORRA vmarti@horwathhtl.com BARCELONA, SPAIN vmarti@horwathhtl.com BUDAPEST, HUNGARY mgomola@horwathhtl.com DUBLIN, IRELAND ireland@horwaththl.com FRANKFURT, GERMANY rknospe@horwathtl.com ISTANBUL, TURKEY merdogdu@horwathhtl.com LISBON, PORTUGAL vmarti@horwathhtl.com LONDON, UK eheiberg@horwathhtl.com MADRID, SPAIN vmarti@horwathhtl.com MOSCOW, RUSSIA mohare@horwathhtl.com OSLO, NORWAY pewinther@horwathhtl.com PARIS, FRANCE pdoizelet@horwathhtl.com ROME, ITALY zbacic@horwathhtl.com SALZBURG, AUSTRIA gkroell@horwathhtl.com WARSAW, POLAND jmitulski@horwathhtl.com ZAGREB, CROATIA scizmar@horwathhtl.com ZUG, SWITZERLAND hwerhle@horwathhtl.com NORTH/CENTRAL AMERICA ATLANTA, USA mbeadle@horwathhtl.com ATLANTA, USA pbreslin@horwathhtl.com ATLANTA, USA pgrayboff@ horwathhtl.com DALLAS, USA jbinford@horwathhtl.com CHICAGO, USA tmandigo@horwathhtl.com DENVER, USA jmontgomery@horwathhtl.com LOS ANGELES, USA ynathraj@horwathhtl.com LAS VEGAS, USA lboll@horwathhtl.com MONTREAL, CANADA pgaudet@horwathhtl.com MEXICO CITY, MEXICO mjgutierrez@horwathhtl.com NEW YORK, USA sdavis@horwathhtl.com PHOENIX, USA jreigle@horwathhtl.com SAN FRANCISCO, USA jhiser@horwathhtl.com DOMINICAN REPUBLIC sotero@horwathhtl.com TORONTO, CANADA horwath@horwathhtl.com This document has been prepared in good faith on the basis of information available to Horwath HTL and STR Global at the date of publication. The content includes analysis and commentary that are the sole opinions of our research teams and are not to be construed as investment advice. The opinions expressed are our current opinions as of the date appearing in the material and may be subject to change from time to time without notice. Horwath HTL and STR Global do not guarantee or warrant the accuracy or reliability of the information and encourage readers to independently assess the relevance and accuracy of the information before taking any action based on the information contained in this document. Horwath HTL and STR Global will not be liable for any loss, damage, cost or expense incurred or arising by reason of any person using or relying on information in this publication. The foregoing does not replace, supersede or amend any other disclaimers or warranties that may appear in this publication. PAGE 12 ASIA PACIFIC QUARTERLY UPDATE VOL.3
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