Colliers Insight Asia Hotels Q1 2018
Colliers Hotel Insight
A quarterly digest of key trends in the hospitality sector
Inside this quarter
OPINION High-end restaurants and hotels. Do they fit HOTELS China the demand for hotels Destination of the quarter Singapore GAMING Update on the Asian Gaming market
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Foreword
Welcome to our Q1 2018 edition of Colliers Hotels Insight, our quarterly magazine specifically for hotel and other accommodation stakeholders across Asia. This edition features key trends in various destinations across Asia, a highlight of key industry disruptors, and a technical section. We also provide insights and opinions on topical issues within the gaming and leisure sectors. Hotels across Asia Pacific have had a mixed start to 2018, with room occupancy levels showing a modest increase of 1.5% year to date February, when compared to the previous period. This increase however, came at the expense of ADR which retreated by 4.5%, led mainly by Central and South Asian properties. Bali, Hanoi, Manila, and Seoul all witnessed sizeable drops in RevPar. Whether this sets the scene for the remainder of 2018 remains to be seen given the short time line. It is also interesting to note the negative impact the Winter Olympics had on occupancy levels at hotels in Seoul. Supply growth in destinations across Asia is likely to continue to weigh on performance, and especially ADR growth. Bali, Jakarta, Shanghai and Guangzhou are some of the destinations expected to witness significant new additions in the coming years. Recent sabre rattling between the USA and China is likely to weigh to some degree on business and consumer confidence, thereby tempering demand growth especially if it escalates. However, intra-Asia travel and the growing domestic markets in a number of the larger destinations across Asia, is likely to continue to underpin demand. On that note, hoteliers and their marketing teams should be considering spending some more of their budgets on the Asian and domestic markets markets that, if handled correctly, can lead to sustained levels of repeat and referral business.
Govinda Singh
Executive Director | Hospitality Specialist Valuation & Advisory | Asia govinda.singh@colliers Looking at supply development, China's second-tier cities are seeing higher rates of growth than the first-tier cities. This has brought both opportunities and challenges for markets in cities like Xi'an, Hangzhou, Tianjin, Wuhan and Dalian, which have seen rate declines over the past few years. Thanks to a boom in domestic leisure travel, these markets saw growth in both occupancy and rates.
- Christine Liu, STR GlobalColliers Hotels Insight | Q1 2018 | Colliers International
Colliers Hotels
Colliers International launched its specialised hotels division in 1985. Today we provide expertise in capital valuations, management agreements, rental advisory feasibility studies, asset management and transaction advisory services, as well as brokerage across Asia Pacific. Our dedicated hotel specialists are based in Australia, Hong Kong / China, India, Singapore and Thailand. We regularly act on behalf of major institutional property owners / funds for their valuation needs, from single strata units to composite developments and golf courses. For all valuation purposes, including IPOs, listings, acquisitions, disposals and mergers. Our multi-lingual and multi-cultural team comprised of highly qualified professionals will help clients achieve their real estate goals. Colliers' professionals have extensive operating and consulting experience in the hospitality industry across the major asset classes, which provides clients with extraordinary value and a single point of contact, through timely, relevant and forward-looking advice. This global division has exceptional relationships with investors worldwide, required for the timely and effective sale of assets. In addition, they have worked with a wide range of clients including corporate hotel clients, private equity, sovereign wealth funds, independent owners, REITS, governments, and banks.
Our Services
Whether you are a startup or well-established owner, developer or investor, we will help you go through the business life cycle by providing specialised, value-added advices that are tailor-made to your specific needs: Market Demand and Feasibility Studies Valuations Property and Business Plant and Machinery Valuation Impairment Testing Capital Markets Due Diligence Internal Business Reviews Operator Search and Select Benchmarking and Forecasting Growing the business: extensions, refurbishments, brand roll out and expansion Asset Management Business Restructuring opco / propco Needs Analysis / Economic Impact Studies Highest and Best Use / Concept Designs Transaction Advisory, IPO and REITS listing Management Agreements and Lease Reviews Litigation Support and Dispute Resolution Project Management and Leasing Tourism Strategy and Master PlanningColliers Hotels Insight | Q1 2018 | Colliers International
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Contents
COLLIERS HOTELS . 3
Our Services ........ 3 Hospitality Track Record .. 4
HOTEL TRENDS ....... 6
High-end restaurants and hotels. Do they fit ....... 6 China the rising demand for hotels ........ 7 Destination of the quarter Singapore ... 10
HOTEL INVESTMENT AND VALUATION .. 13
Capital markets insights . 13 Recent notable transactions ....... 13
GAMING ...... 14
Update on the Asian Gaming market ...... 14Colliers Hotels Insight | Q1 2018 | Colliers International
Hotel Trends
High-end restaurants and hotels. Do they fit
off-season period. The image of the hotel will also improve and occupancy rate and revenue will follow suit. As guests may choose to stay in the hotel based on its reputation as a centre for culinary excellence, this plays an important role in maintaining guestroom occupancy. Indeed, some hotels are based around food with rooms being the ancillary offering take Relais & Chateaux for example. Marketing If an existing high-end hotel would like to add their own restaurant to the same standard of a Michelin starred restaurant, this will take up much time and a considerable amount of capital due to the intensive marketing and other efforts involved. This could be in the form of promotions or advertising campaigns which could affect profit margins. If the same space is leased out to a Michelin starred restaurant instead, they would not only generate rental income, but also gain `free' promotion as having the label that means world-wide recognition for creating meals of exceptional standards, attached to the hotel. This will in turn reduce the hotel's operating costs. However, as much as we see many positive sides of this combination, this does not necessarily equate to profitability. In fact, hotel restaurants are generally at risk of running at a loss if they do not have a constant flow of customers. While customers may appreciate the quality of the food served, one critical attribute of successful hotel restaurants is their ability to appropriately respond to the changing needs of the market while maintaining a profitable operation. This may well mean the food and pricing must match the aspirations of the local market. It must be remembered, the cost of running a Michelin starred restaurant is high, with food costs taking up a large portion as only top-quality ingredients are being used in the process. This e