Monday, January 12, 2015

Jakarta & Bali Regional Bright Spots for Hotels Moving into 2015

Shangri-La Jakarta
Cushman & Wakefield released an end-year update and forecast on the hotel markets across Asia and Australia over 18 gateway cities and prime destinations, namely Jakarta, Bali, Beijing, Shanghai, Hong Kong, Mumbai, National Capital Region (India), Tokyo, Kuala Lumpur, Maldives, Manila, Singapore, Seoul, Colombo, Bangkok, Ho Chi Minh City, Sydney and Melbourne.

In the first eight months of 2014, the Asia Pacific region welcomed 5% more international tourists (overnight visitors) over the same period in 2013, with more than 1.1 billion tourists expected by year-end. According to the UNWTO, the South Asia sub region was a star performer alongside North America, with growth at 8%. Arrival growth in South-east Asia was however, stymied by regional geopolitics and negative reactions to unfortunate aviation incidents with impacts across the sub-region due to the proclivity for multi-city itineraries. 

The South-east Asian region posted arrival growth of 2% after robust progress in 2012 and 2013, pulling down wider Asia Pacific growth to 5% from January to August 2014 after a 7% growth witnessed over the same period in 2013. Across the region however, continuing economic growth, investment in infrastructure and visa facilitation measures enhance the industry amid recovering geopolitical situations and remain indicative of the significant focus on tourism and hospitality moving forward.  

Le Meridien, Jimbaran, Bali
Hotel performance posted across the region reflected a mixed bag with growth expected overall for 2014 and 2015 as the industry faced numerous headwinds over the year. Geopolitical instability in Vietnam, political uncertainty in Thailand and Hong Kong and negative reactions to unfortunate aviation incidents for Malaysia dented demand, though these impacts were largely limited to South-east Asia with Bangkok, Kuala Lumpur and Singapore experiencing softer arrival figures due to the inclination for multi-city itineraries and occupancies expected to close 2014 down by 15.1%, 2.0% and 1.5% respectively. Jakarta and Bali remained bright sports in the sub-region, as demand continued to push Average Room Rates (ADR) and drive growth in Revenue Per Available Room (RevPAR), with double-digit RevPAR growth in local Indonesian Rupiah expected at 11.5% and 10.2% respectively.

Singapore at US$207, Hong Kong at US$193 and Sydney at US$185 are expected to top the region with the highest ADRs in 2014. In local currencies however, markets with the fastest growing rates year-on-year in 2014 are expected to be Jakarta at ID Rupiah 1.2 million at 15.0% growth, Tokyo at JP Yen 16,465 at 7.1% growth and Ho Chi Minh City at VN Dong 1.9 million with growth at 6.5%. Strong Occupancy growth to 64% in Shanghai is also expected to boost RevPAR to CN Yuan 417, a 12% growth over RevPAR in 2013.      

Continuing economic growth and enhanced flight connectivity remain strong fundamentals for future growth, with Asia Pacific’s growing and increasingly affluent middle-class as a significant source market. North Asia continued its growth trend as Chinese travellers flocked to sub-region neighbours, propping RevPARs (in local currencies) in Tokyo, Hong Kong and Seoul up with gains of 8.5%, 4.7% and 4.2% respectively. 

Kulkarni added, “While the markets of Bangkok and Kuala Lumpur faced severe headwinds in 2014, international visitation is expected to rebound in 2015 and ramp up demand to pre-existing levels. The negative impact of political uncertainty in Thailand and aftereffects of Malaysia’s aviation incidents are not expected to linger into the medium-term. Across Asia Pacific, development and incoming supply will continue to impact markets with upcoming supply growth expected after a period of significant investment across markets from Australia to Vietnam.”

As the South-east Asian region’s tourism industry was buffeted by geopolitical disruption and unfortunate incidents, Indonesia’s stability and successful election process fostered interest in visitation. International arrivals grew at an accelerated pace in H1 2014 at 8.7% growth compared to the 7.2% growth witnessed in H1 2013. Although growth in the supply of rooms has dampened occupancies, overall growth in RevPAR is expected given significant gains in average room rate.

Jakarta’s ADR is expected to rise by 15% to IDR 1.2 million by the end of 2014, with a slight dip in Occupancy given the influx of new rooms. ADR growth in Bali should top 9% over 2014, with demand showing strong resilience against supply increments. The pace of growth is expected to moderate in the short term, though gains in ADR will continue to drive growth. With a significant pipeline of rooms, the market is primed for growth in both international and domestic visitation, with strong expectations of the country’s growing middle class willingness and propensity to travel.    

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