Surging supply amid government spending austerity has taken
a bit of the shine off China's hotel market, but the country remains by far the
dominant market for development in the Asia/Pacific region.
Corporate negotiated rates for 2014 in the region were about
flat compared with 2013 rates, according to Carlson Wagonlit Travel hotel
solutions group director Yon Abad. The average rate is up 2.7 percent year over
year in Hong Kong but down in China, Japan and India, largely a result of
increasing supply, he said.
In China, at least, that supply growth hardly is finished.
Lodging Econometrics reported that as of the third quarter of 2013, China in
its construction pipeline had 1,695 hotel projects totaling 435,000 rooms (up 6
percent from the year prior). That represents 68 percent of all projects and 74
percent of the rooms across the total Asia/Pacific construction pipeline.
Six of the seven Asia/Pacific cities with the largest
construction pipelines are in China. Shanghai is at the top with 91 projects
totaling 16,437 rooms (down 8 percent from the prior year), followed by Hong
Kong with 73 projects totaling 13,544 rooms (up 23 percent from the prior
year).
"Despite a minor economic slowdown, China's total
pipeline has been trending upward for 17 quarters and is at a new peak,"
according to Lodging Econometrics. "Development is so strong that some
cities like Hong Kong are concerned that future supply coming online might
cause a prolonged glut of rooms."
Nevertheless, the market may well be able to sustain that
supply growth. "From an investor's point of view, we haven't seen evidence
that the occupancies are dropping or the rates are dropping at a level that
would indicate an oversupply," Lodging Advisors CEO Sean Hennessey said
during The BTN Group's Travel Management 2014 event in December. "I've
heard the same kind of rumors, that it's not sustainable, but overall, the
interest is so strong relative to the size of the markets that they have a long
way to go to fully emerge."
Speaking at the same event, Citi managing director and
global head of general services and travel Mick Lee said she is seeing volume
increase in six out of 10 of her organization's top Chinese markets, including
a 19 percent increase in Beijing and a 38 percent increase in Shanghai.
In India, however, hotel development is slowing. As of the
third quarter of 2013, it had the second-largest construction pipeline among
countries in the Asia/Pacific region, with 335 projects totaling 56,276 rooms.
But those numbers are down 8 percent and 11 percent, respectively, from the
prior year. India's pipeline has been trending downward since the end of 2010.
Brazil recently surpassed India with the third-largest pipeline in the world,
according to Lodging Econometrics.
Even so, the firm noted that India has seen "some
indications of an economic resurgence brought about by the recent statewide
elections. The stock market has risen strongly, the rupee has gained strength
and there are signs of foreign investment returning."
Meanwhile, development in Indonesia is on the rise. The
country's pipeline as of the third quarter of 2013 stood at 203 projects
totaling more than 33,000 rooms (up 19 percent from the year prior), good for
third-largest in the region and the fifth-largest in the world, according to
Lodging Econometrics. With 73 projects totaling 12,615 rooms, Jakarta's
market-specific pipeline is surpassed in size only by Shanghai and Hong Kong
among Asia/Pacific markets, the firm reported.
Real estate investment management firm Jones Lang LaSalle
noted a growing interest in hotel investment and development in Southeast Asia's
markets, particularly Vietnam, Cambodia and Myanmar. Those markets in recent
years have seen increased lift provided by airlines, improved infrastructure
and a boost in tourism, the firm reported.
Rate and occupancy growth is particularly strong in Myanmar,
with Yangon and Mandalay seeing an increase in corporate and leisure travel
amid limited supply, but hotel development in the country is a challenge.
"Until further foreign investment law is enacted and
economic reform takes shape, it will be challenging to establish genuine hotel
investment sales," according to Jones Lang LaSalle. "That said,
international hotel companies are doing their best to secure opportunities with
domestic owners and developers, including Accor, which is developing three
newly built hotels in Myanmar."
This report originally
appeared in the Feb. 3, 2014, edition of Business
Travel News.