Asian hotel industry seen to stabilize

Asian hotel industry seen to stabilize

Martin Abbugao, Agence France-Presse, Singapore

The Asia-Pacific hotel industry should stabilize this year, with Thailand the star performer, and tourists from China boosting occupancies in Hong Kong and Singapore, industry executives said Wednesday.

Japanese companies are expected to continue selling hotel assets at home and abroad, while industry opportunities are most attractive in Australia, Indonesia and Japan, they told a conference here.

A global travel squeeze resulting from Sep. 11 terrorist attacks in the US using hijacked planes to slam into buildings hammered the hotel industry last year.

"We are expecting occupancies in Asia to stabilize, with some growth in average room rate going into the fourth quarter (of 2002)," said Scott Hetherington, Asia vice president for property consultancy Jones LangLasalle Hotels.

"We are also expecting hotel values to stabilize after an average fall of 10-15 percent across all markets in 2001," he said.

Jimmy Koh, the head of treasury research of United Overseas Bank in Singapore, said the US economy was well on the way to a recovery and should help economies in the region.

"Overall, there are risks to the US recovery, but the risks are fairly contained," he said, citing the resilience of American consumers, and keeping an eye on a possible, but unlikely, oil embargo arising from the Middle East conflict.

The experts pointed to opportunities in China, as well as the impact of Chinese tourists visiting countries in the region.

Koh noted that China took in US$47 billion in foreign direct investments in 2001, or 70 percent of the total investments into Asia, up from 30 percent 10 years ago.

Rutger Smits, director for hospitality and leisure services at Arthur Andersen, said China would be "the success story of 2002".

"It has a huge potential and I think we're just seeing the beginning of that," he said.

A snap electronic poll of the participants showed most of them viewed the rising Chinese city of Shanghai as this year's star performer.

However, Hetherington of Jones LangLasalle said that Thailand would post the strongest year.

He said oversupply conditions are likely in the four- and five-star hotel sectors Shanghai, Mumbai, Beijing, Kuala Lumpur and Melbourne.

"The Thai market we believe will be the star performer in 2002," he said, adding that Phuket continued to be seen as a safer destination than rival Bali in Indonesia.

"The sale of assets ... will occur in Indonesia, and the Japanese are expected to continue to dispose their assets both domestically and throughout the region," he said.

Chinese tour groups "will positively impact mid-level hotels in Hong Kong, Singapore and Thailand" while the Indian hotel market "is starting to present interesting opportunities," he added.

The Australian cities of Sydney and Brisbane should expect brisk growth this year and Cairns should benefit from the launch of the budget carrier Australian Airlines.

"There is still an enormous weight of capital wishing to invest in the Asia-Pacific region. We expect opportunities to buy occurring in all countries but in particular Australia, Japan and Indonesia," Hetherington said.

But for transactions to flourish in Asia, the region has to emerge from the cultural concept that a hotel real estate, or a family business, is a legacy to be handed down from one generation to another, he said.

Transactions in the hotel industry in 2001 totaled $9.6 billion in Europe, compared to only $1.75 billion in Asia, he said.

"The question is what will be the catalyst for change in the Asia-Pacific," he said, adding it could be greater accountability to shareholders, compliance to regulations and banks aggressively selling foreclosed assets.