CBRE’s latest Asia Pacific Hotels & Hospitality Performance & Outlook report explores the key trends driving hotel performance in Asia Pacific, as well as the outlook for the sector.
Despite tourism demand and hotel performance in Asia Pacific beginning to stabilise, pockets of growth still remain in the hospitality sector as the region positions itself as the global tourism hub of the future.
The International Air Transport Association (IATA) forecasts Revenue Passenger Kilometres in Asia Pacific to grow by 9% in 2025, the highest growth of any region globally. The continued growth of tourism is also supporting the regional economy; World Economic Forum (WEF) data show tourism’s contribution to GDP growth is the highest in all four of the Asian sub-regions, further positioning Asia as the fastest-growing tourism economy.
Despite the positive data, macroeconomic and geopolitical factors continue to impact travel decisions. As global markets adjust to the changing interest rate environment, and the subsequent impact on foreign exchange rates, hoteliers will need to be conscious of evolving tourism and guest demand in order to meet budget and operational targets.
While hotel performance continues to improve across most markets in Asia Pacific, growth is proceeding at a slower rate than the last couple of years. Average Daily Rates (ADRs) continue to outpace inflation as supply remains limited. Although occupancy levels continue to normalise, most markets are still trailing historic levels. In response, hotels are adopting real-time, demand based pricing strategies to react quickly to demand changes during events or peak times. This flexibility helps them capitalise on high-demand periods even if overall occupancy is low.
Supply continues to be impacted by rising construction costs, which are constraining the future pipeline. While upcoming hotel supply is limited compared to previous years, luxury chain scale hotels remain underpenetrated in Asia Pacific. This presents an opportunity for growth, particularly as the number of High-Net Worth Individuals (HNWIs) continues to grow.
As the convergence of hotels and living continues, investors are looking to tap into the operational real estate sector to drive income growth. Conversions of hotel assets into student accommodation remains a trend. Investment in co-living is also accelerating in many markets, particularly in Korea, Singapore, Australia and Hong Kong SAR, as investors look to offer flexible living solutions in tight residential markets.
Investors retain a strong appetite for hotel investment, especially in liquid markets such as Japan, Korea, Australia and Singapore. Value-add opportunities are their main focus, particularly for midscale product with prospects for rebranding or conversion. With investment volumes reaching US$12.1 billion as of August y-t-d, full year investment is on track to reach the US$16.3 billion recorded last year.
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Ada Choi
Head of Research, Asia Pacific
+852 2820 2871
CBRE Hotels