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Despite the increasing number of international tourist arrivals in the Asia Pacific (APAC), hotel performance in the region is still weak partially due to the sluggish traditional full service hotel segment, according to a CBRE report.
The property consultancy explained that full-service hotels are struggling to maintain their price premium amid high fixed costs. Revenue among hotels from this submarket has also been impacted by the softer demand for meeting and convention facilities from multinationals, which remain very cost-sensitive.
At the same time, boutique hotels run by smaller brands or independent hoteliers have become more popular.
The rise of shared accommodations provider like Airbnb also poses a major challenge for the traditional hotel industry. To be able to compete with these disruptors, CBRE urges hoteliers to offer loyalty programmes, provide more affordable accommodations and take advantage of the fact that tourists find safety and security as primary concerns for shared space.
In spite of the lacklustre performance of full-service hotels and the stiffer competition with boutique hotels and shared accommodations provider, the situation is expected to improve gradually.
“Over the next five years the number of hotel rooms will grow by an average rate of 2.6 percent per annum, well behind the forecasted growth of 5.7 percent per annum for Asia Pacific tourist arrivals,” said CBRE, citing data from the United Nations World Tourism Organisation (UNWTO).
Additionally, more international tourists are visiting the Asia Pacific on the back of a growing middle class and rising household incomes, which are enabling more people to travel to other countries.
In fact, visitor arrivals in the region increased at a compound average growth rate (CAGR) of 5.3 percent from 2008 to 2015, surpassing the global rate of 3.1 percent.
“Japan recorded the strongest growth, with total arrivals up by 47 percent year-on-year supported by the expansion of low-cost carriers, easier visa application procedures and the weaker yen during 2015,” said the property consultancy.
The weaker currency also lured tourists in Australia and New Zealand, both of which posted strong gains in visitor arrivals, said CBRE. However, the weakening of several Asia Pacific currencies against the US dollar led to a decline in international tourism receipts to US$418.3 billion (S$570.27 billion) in 2015, although this is still up four percent if exchange rate fluctuations are taken into account.
In 2015, the region registered 279.2 million tourist arrivals, and much of this growth was driven by China. In fact, the total number of Chinese outbound travellers climbed by 10 percent to 128 million last year on an annual basis, while their spending surged by 25 percent to US$292 billion (S$398.08 billion). The country now ranks in the top three tourism source markets for 10 major countries in APAC.
This year, most Asia Pacific markets have recorded further growth in tourist arrivals, except for Hong Kong, which continues to see a decline in arrivals from China. On the other hand, Japan continues to see an influx of visitors from Greater China and South Korea.
Looking ahead, the UNWTO remains positive over the long-term outlook of APAC’s tourism industry. It believes the Asia Pacific will see the strongest growth of any region over the next five years, at around 5.7 percent per annum and attracting about 355 million visitors by 2020.
Furthermore, this significant growth will continue to be fuelled by China, which will continue to lead the growth in outbound travel and spending, added CBRE.
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