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Investor demand remains firm
Lack of stock for sale frustrates investors
Limited number of major transactions
Tourism arrivals post steady growth
KIC acquires major asset in Hong Kong
Bonvests purchases first hotel in Australia
Vietnam attracting stronger interest
Outlook remains upbeat
HOTEL
TRENDS
ASIA PACIFIC Q3 2015
4
3
5
6
7
8
9
10
Overview
Hong Kong
Japan
South Korea
Singapore
Thailand
Australia
Vietnam
HOTEL TRENDS
Q3 2015
3
© CBRE Ltd 2015
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OVERVIEW
Investor demand remains firm but few major deals completed
• Investor demand for hotels in Asia Pacific remained firm in Q3 2015 but the period
witnessed the completion of just a few major deals as the lack of stock for sale
continued to frustrate investors.
• Tourism arrivals continued to post steady growth during the quarter. The latest United
Nations World Tourism Organisation (UNWTO) barometer reported that Asia Pacific
recorded a 4.0% y-o-y increase in international arrivals in the year to August. Oceania
led growth with 7.0% y-o-y followed by Southeast Asia with 6.0% y-o-y.
Korea Investment Corporation acquires major asset in Hong Kong
• Highlights this quarter included InterContinental Hotels Group (IHG) agreeing to sell the
InterContinental Hong Kong to the Korea Investment Corporation (KIC) via Gaw Capital
Partners for US$938 million.
• Australia remained very active with noteworthy transactions including Singapore-listed
Bonvests Holdings acquiring the Four Points by Sheraton in Perth for AUD 91.5 million.
• Japan was also positive as tourism arrivals continued to scale new heights. Investors
displayed a robust appetite for hotels but the positive market outlook means owners are
reluctant to dispose of assets and this is inhibiting the flow of deals.
Vietnam attracting stronger interest
• Most other major markets including Singapore, Thailand and South Korea were quiet
during the period, again largely due to the lack of assets for sale, although forthcoming
oversupply was the primary concern in the former.
• Elsewhere around the region, Vietnam is the subject of growing interest among investors
as the tourism sector enjoys rapid growth.
• The outlook remains largely upbeat and investors will continue to display a healthy
appetite for hotels. More investors will broaden their search to regional cities in search
of higher yield opportunities.
Robert McIntosh
Executive Director
CBRE Hotels
Asia Pacific
t: +65 6326 1200
Asia Pacific Hotel Investment Turnover
HOTEL
FUNDAMENTALS
INVESTOR
DEMAND
TRANSACTION
VOLUME
TOURIST
ARRIVALS
Source: CBRE, Q3 2015. Includes transactions above US$10 million.
0
2
4
6
8
10
12
14
2012 2013 2014 Q1-Q3 2014 Q1-Q3 2015
(US$ b
illion)
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4 © CBRE Ltd 2015
HONG KONG
Another large asset changes hands
• Hong Kong continued to see strong investor appetite for hotels at the top end of the
market and one major transaction was concluded. However, the slowdown in tourist
growth has caused some investors to adopt a more realistic view of potential upside in
the mid and lower tier sector, compared to their previously very optimistic outlook.
• Hong Kong Tourism board data showed tourist arrivals slipped 4.0% in September from
a year ago. Mainland visitors, which accounted for 77% of the visitors to Hong Kong,
fell 4.7% during the same month.
Values remain resilient and yields tighten further
• Occupancy fell to 80.7% in September from 86% in October but ADR recorded steady
growth on a m-o-m basis over the same period. The market continues to slow from the
record highs set in previous years but this is not a major worry.
• Slower visitor arrivals from China pose a clear challenge to the market although values
have been resilient. Yields have tightened further in recent quarters.
• In early July InterContinental Hotels Group (IHG) agreed to sell the InterContinental in
Kowloon to the Korea Investment Corporation (KIC) via Gaw Capital Partners for
US$938 million. KIC will reportedly spend a further US$240 million to substantially
upgrade the property.
No further major deals anticipated
• Investors continue to look at Hong Kong from a long term perspective but many buyers
are sitting back at present due to high prices and weaker tourism growth. Foreign
syndicates and funds continue to lodge enquiries while local families and small
companies remain interested in mid to lower tier assets.
• There will continue to be strong demand for top tier assets from domestic and overseas
buyers in spite of the weaker fundamentals. However, the lack of stock means deal flow
will be limited.
Robert McIntosh
Executive Director
CBRE Hotels
Asia Pacific
t: +65 6326 1200
HOTEL
FUNDAMENTALS
INVESTOR
DEMAND
TRANSACTION
VOLUME
TOURIST
ARRIVALS
Hong Kong Hotel Investment Turnover
0.0
1.0
2.0
3.0
4.0
0
5
10
15
20
25
30
2012 2013 2014 Q1-Q3 2014 Q1-Q3 2015
(US$ b
illion)
(HKD
billion)
Local currency US$
Source: CBRE, Q3 2015
5
© CBRE Ltd 2015
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JAPAN
Investor appetite remains robust
• The market remained very positive with tourism numbers continuing to surge and
investors displaying a robust appetite for hotel properties. The positive market outlook
means owners are not keen to dispose of assets and this is inhibiting the flow of deals.
• Data released by the Japan National Tourism Organization showed visitor arrivals in Jan
through Sep reached 14.5 million (48.8% y-o-y growth). Visitors from China are driving
growth, with arrivals from this market surging 114.6% from a year earlier. Chinese
tourists are now visible not only in Tokyo and Osaka but all other major cities.
Focus shifts to development projects
• Rapidly increasing demand is pushing up room rates. RevPAR in Osaka grew more than
30% y-o-y in January through September. The increase in tourism arrivals and the
development pipeline suggests growth will accelerate in 2016.
• Investors and operators are rapidly moving into development opportunities. During the
period, Great Eagle Group entered into a PSA to acquire a plot in Tokyo for JPY 22.2
billion (US$179.9 million) and will construct the 270-key luxury Langham Place hotel on
the site. Another plot nearby was acquired by Hulic with a purchase price rumoured to
be more than JPY 6.0 billion (US$48.6 million). A business hotel will be built on the site.
Investment volume expected to decline
• Major deals included Hoshino Resort’s purchase of a portfolio of four ANA Crowne
Plaza hotels for around JPY 36 billion (US291.7 million). The seller was Morgan Stanley
and the assets were one of the few remaining properties for sale by non-Japanese real
estate investment funds, which have been the main source of the opportunities for the
past three-four years.
• The industry views the inbound tourism boom as the “new norm” rather than a short
term trend. Hotel development makes sense for more players even though land prices
and construction costs appear to be in the higher range.
Naoki Yoshiyama
Senior Director
CBRE Hotels
Japan
t: +81 3528 89847
HOTEL
FUNDAMENTALS
INVESTOR
DEMAND
TRANSACTION
VOLUME
TOURIST
ARRIVALS
Japan Hotel Investment Turnover
0.0
0.5
1.0
1.5
2.0
2.5
3.0
0
50
100
150
200
250
2012 2013 2014 Q1-Q3 2014 Q1-Q3 2015
(US$ b
illion)
(JPY b
illion)
Local currency US$
Source: CBRE, Q3 2015, excluding related party transactions
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6 © CBRE Ltd 2015
SOUTH KOREA
Tourism arrivals rebound
• The market remained very quiet in Q3 2015 as the supply demand imbalance and weak
economic outlook continued to discourage investors. There was some positive news
during the quarter, however, as the tourism sector rebounded after authorities declared
an end to the Middle East Respiratory Virus (MERS) outbreak on July 28.
• In October the South Korean Tourist Organisation (KTO) announced that the numbers
of foreign tourists visiting the country had almost recovered to levels seen before the
MERS outbreak. KTO data showed that in September the country welcomed 9.6 million
tourists, a slight decline of 3.1% y-o-y.
Market remains very quiet
• A few hotels are currently in the marketing phase but no major transactions were
completed. Local investors generally remain reluctant to enter the market as they lack
operational expertise in the sector. Many are concerned about short term oversupply.
Foreign investors are inactive but a few overseas buyers are looking at value added and
opportunistic deals.
• Business hotels continue to see strong enquiries and there are a number of assets in this
segment currently available for sale. However, only those with a value added or
opportunistic angle are attracting strong interest.
• The government continues to offer incentives for new hotel development in the belief
that there will be a shortage of rooms in the medium term. However, the private sector is
more sceptical and believes the market is adequately supplied.
Outlook remains subdued
• During the quarter it was reported that China Minsheng Investment Corp. - the biggest
private investor in China - would invest KRW 180 billion (US$157 million) in Emerson
Pacific, a South Korean resort and hotel developer.
• The outlook remains subdued and the sector is expected to see very little activity in the
period up to the year-end.
Don Lim
South Korea Hotel Investment Turnover
Senior Director
Head of Capital Markets
South Korea
t: +82 22170 5852
HOTEL
FUNDAMENTALS
INVESTOR
DEMAND
TRANSACTION
VOLUME
TOURIST
ARRIVALS
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0
200
400
600
800
2012 2013 2014 Q1-Q3 2014 Q1-Q3 2015
(US$ b
illion)
(KRW
billion)
Local currency US$
Source: CBRE, Q3 2015
7
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SINGAPORE
Possible recovery in sight
• Visitor arrival numbers continue to show improvement in September, increasing by 3.0%
compared to the same month a year earlier to register 1,131,517 visitors. This is the
fifth straight percentage increase on a m-o-m basis.
• Performance remained solid for September with occupancy at 82.09% and ADR at
S$265.5, although for the period from Jan-Sept this is a dip in RevPAR terms compared
to last year. It will be interesting to see how newly opened properties will perform in the
current environment. A solid start will be a strong indication of the strength of the
market.
• The strength of the SGD compared to currencies in Malaysia and Indonesia is still
impacting arrivals from those markets as Singapore is getting more expensive for them.
However, arrivals from China continue to make a strong comeback.
Previously quiet investment market sees some activity
• High pricing and the lack of investable stock have limited deal flow in Singapore in
recent quarters. However, during the period it was reported by media that Gaw Capital
Partners had acquired Big Hotel Singapore for S$ 203 million (US$142.5 million).
• Big Hotel is a 16-storey, 308-room hotel that has been on the market for some time.
The reported purchase price is understood to be significantly lower than the original
asking price, perhaps reflecting the greater realism now creeping into the market.
Investors continue to look abroad
• Domestic investors continue to look abroad for opportunities as markets in Europe and
the United States currently offer better yields and more upside potential compared to
Singapore. Interest in the Singapore hotel market remains strong but appetite is more
geared towards strong and established assets.
• The outlook remains challenging with high operating costs and the strength of the SGD
of particular concern. Labour continues to pose a headache for hotel operators, with
attracting and retaining skilled staff a major challenge.
Junrong Teo
Singapore Hotel Investment Turnover
Assistant Vice President
CBRE Hotels
Asia Pacific
t: +65 6229 1152
HOTEL
FUNDAMENTALS
INVESTOR
DEMAND
TRANSACTION
VOLUME
TOURIST
ARRIVALS
0.0
0.5
1.0
1.5
2.0
2.5
3.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2012 2013 2014 Q1-Q3 2014 Q1-Q3 2015
(US$ b
illion)
(SGD
billion)
Local currency US$
Source: CBRE, Q3 2015
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8 © CBRE Ltd 2015
THAILAND
Investor demand remains firm but deal flow still limited
• Thailand continued to report solid investor demand for hotels this quarter but the lack of
assets for sale remained the major obstacle to transactions. One small asset changed
hands in Bangkok but there was very little activity elsewhere. Bank lending for hotel
development remained tight.
• The economy showed signs of a turnaround in Q3 2015 with GDP growth for the
quarter standing at 1.0%, the fastest recorded so far this year. Tourism remained the
major bright spot with visitor arrivals for the quarter standing at just under 7.3 million,
an increase of 24% y-o-y.
Chinese visitor arrives continue to recover
• Arrivals from China in Q3 2015 surged 73% from a year earlier. Visitors from this
market now account for close to a third of all arrivals. Bangkok is benefitting in
particular from more short-break and independent visitors from China. The number of
Russian visitors continued to fall while those from elsewhere in Europe were largely flat
on a y-o-y basis.
• Occupancy continued to benefit from the strong increase in tourism arrivals, with the
overall figure standing at 80% as of the end of the quarter. ADR and RevPAR recorded
further steady gains.
• One hotel transaction was reported in Q3 2015. Singapore-based Clover Hotel Group
purchased the under-construction 95-room Glow Hotel on Sukhumvit Soi 16 in Bangkok
from a local investor for just over THB 400 million (US$11 million).
New supply set to weaken substantially in 2018
• There are currently 5,000 new rooms in the pipeline in Bangkok but new supply will
contract significantly post-2018 which could finally stimulate some growth in room rates.
• Tourism arrivals are expected to continue to post solid growth as the year-end high
season approaches. Investor demand will remain firm but there will be limited
opportunities to buy for the foreseeable future.
James Pitchon
Thailand Hotel Investment Turnover
Executive Director
Thailand
t: +66 2654 1111
HOTEL
FUNDAMENTALS
INVESTOR
DEMAND
TRANSACTION
VOLUME
TOURIST
ARRIVALS
0.0
0.1
0.2
0.3
0.4
0.5
0
2
4
6
8
10
12
14
2012 2013 2014 Q1-Q3 2014 Q1-Q3 2015
(US$ b
illion)
(TH
B b
illion)
Local currency US$
Source: CBRE, Q3 2015
9
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AUSTRALIA
Asian investors remain very active
• Investor demand for hotels remained solid in Q3 2015 and the period saw the
completion of a number of sizable deals as the flow of Asian money into the market
continued. The lack of assets for sale in core markets continued to result in solid interest
for assets in regional markets.
• Sydney and Melbourne both continued to perform well, with the five star segment
reporting record room rates and occupancy. Perth reported a resilient quarter as room
rates fell slightly but the decline was not as significant as had been anticipated.
Tourism sector performing well
• The tourism sector is performing strongly, supported by solid growth from China. In
September the number of Chinese short-term visitors overtook those from New Zealand
for the first time. The month saw 113,500 visitors from China and Hong Kong
compared with 110,000 from New Zealand, traditionally the main source of arrivals.
• The decline in the AUD against major currencies also boosted the market this quarter as
more Australians opted to take domestic vacations. This trend has benefitted the
hospitality sector in leisure destinations such as North Queensland.
Bonvests acquires first hotel in Australia
• Major transactions included Singapore-listed Bonvests Holdings acquiring the Four
Points by Sheraton in Perth for AUD 91.5 million (US$65 million), marking its first
purchase in Australia and one of the biggest hotel deals recorded on the west coast.
• The seller was APHV Perth InvestCo, a joint venture formed by the Government of
Singapore Investment Corporation (GIC) and US real estate investment trust Host Hotels
& Resorts.
• The focus of activity may shift to Melbourne in the coming months due to the limited
options to acquire assets in Sydney as a result of the recent turnover of stock.
Forthcoming sales are expected to include the Melbourne Hilton South Wharf which
market observers see as a litmus test for trophy assets outside of Sydney.
Wesley Milsom
Director
CBRE Hotels
Australia
t: +61 29333 3423
Australia Hotel Investment Turnover
HOTEL
FUNDAMENTALS
INVESTOR
DEMAND
TRANSACTION
VOLUME
TOURIST
ARRIVALS
0.0
0.5
1.0
1.5
2.0
2.5
3.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2012 2013 2014 Q1-Q3 2014 Q1-Q3 2015
(US$ b
illion)
(AU
D b
illion)
Local currency US$
Source: CBRE, Q3 2015
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VIETNAM
Tourism sector earmarked as key economic pillar
• Vietnam is one of the fastest growing tourism destinations in Asia Pacific, with strong
increases in visitor arrivals recorded in recent years. Investor interest in hotels is steadily
growing, supported by the government’s pledge to develop the tourism sector into a key
economic pillar by 2020.
• The Vietnam National Administration of Tourism reported that the country welcomed just
under 650,000 international visitors in October 2015, representing an increase of
16.1% y-o-y. China was the main source of arrivals with 175,421 visitors, an increase of
22.0% y-o-y, while other top markets included South Korea, Japan, the United States
and Taiwan. Arrivals from neighbouring markets also recorded solid growth, with visitors
from Thailand up 36.2% y-o-y.
Government providing support for tourism growth
• Authorities have recently begun to relax visa restrictions to encourage tourism growth. In
November the government announced it was considering granting visa-free entry for
foreign tourists who purchase tour packages from selected Vietnamese travel agents. In
July, citizens from the United Kingdom, France, Germany, Spain and Italy were granted
visa exemptions permitting them to visit Vietnam for up to 15 days.
• The government is also investing in new infrastructure to support inbound tourism.
Construction of a new terminal at Da Nang International Airport recently got underway
and is expected to be completed in March 2017.
Domestic and foreign investors display solid demand
• Activity in the hotels and serviced apartment sector has gradually picked up over the
course of 2015, with domestic and foreign buyers completing some deals. Among
foreign groups, South Korean and Japanese investors account for the bulk of enquiries.
• Other recent active overseas groups have included Wyndham Hotels, which has teamed
up with a local tourism investment firm to develop the Wyndham Legend Halong, its first
hotel in the country. The 217 room hotel is scheduled to open in early 2016. Elsewhere,
Thai-based ONYX Hospitality Group is also scheduled to open its first hotel in Vietnam
next year. The 364-room OZO Hoi An is expected to debut at the end of 2016.
Focus shifting away from Hanoi and Ho Chi Minh City
• Recent activity by foreign investors has reflected a shift in focus away from the traditional
hotspots of Hanoi and Ho Chi Minh City. Regional markets such as Da Nang, Phu
Quoc and Halong are increasingly popular as the market matures.
• The Vietnam Association of Financial Investors (VAFI) recently proposed to the
government to sell its shares in large hotels, many of which are located in prime
locations. The sales, should they go ahead, will generate strong interest from both
domestic and foreign investors.
Jia Hao Zhang
Consultant
CBRE Hotels
Asia Pacific
t: +65 6326 1674
HOTEL
FUNDAMENTALS
INVESTOR
DEMAND
TRANSACTION
VOLUME
TOURIST
ARRIVALS
11 © 2015 CBRE Group, Inc.
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Asia Pacific Research
Henry Chin, Ph.D.
Head of Research, Asia Pacific
CBRE
12/F Three Exchange Square
8 Connaught Place
Central, Hong Kong
t: +852 2820 8160
For more information about this report, please contact:
Ada Choi, CFA
Senior Director, Asia Pacific
CBRE
12/F Three Exchange Square
8 Connaught Place
Central, Hong Kong
t: +852 2820 2817
Jonathan Hills
Director, Asia Pacific
CBRE
12/F Three Exchange Square
8 Connaught Place
Central, Hong Kong
t: +852 2820 2881
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CONTACTS
Spencer Levy
Head of Research, Americas
t: +1 410 951 8443
Asia Pacific Hotels
Robert McIntosh
Executive Director
CBRE Hotels Asia Pacific
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#32-01 Singapore
t: +65 6326 1200
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