In 2013, there were two transactions in Beijing: Beijing Properties (Holdings) Limited acquired a 75% equity interest in Holiday Inn Downtown Beijing and a Chinese buyer acquired an 80% stake in The Rosedale Hotel Beijing. Opportunities for foreign investors remain limited as state-owned enterprises are required to dispose of assets by a transparent auction process which may not appeal to foreign investors. These acquisitions are mostly domestic due to land titles and complex rezoning principles.
Mainland China’s hotel investment market over the next few years will face the challenge of recapturing investor attention.
Many have noted the lack of liquidity, as profits have started to decline. Brand expansion has also slowed as prime opportunities in A-grade locations have reduced. The risks are increasing as investors are pushed further afield. A fundamental revaluing of assets or marked improvement in operating performance is likely to be needed for international investors to consider the market over the short to medium term.
Tokyo
M A RK E T RE V IE W
Tourism Market Overview
In 2013, Tokyo’s tourism market showed an increase in inbound tourists owing to the country’s economic recovery and the depreciation of the Japanese Yen. Tourism and accommodation demand in Tokyo were boosted by improved tourism infrastructure and more events such as the redeveloped Kabukiza Theatre which reopened in April 2013, and Tokyo Disney Resort which commemorated its 30th anniversary with events running from April 2013 to March 2014.
Japan Tourism Agency figures showed 47.9 million accommodation guests in Tokyo in 2013, a y-o-y increase of 8.2%. Domestic guests recorded a y-o-y growth of 6.2% in 2013 and accounted for approximately 81.0% of total accommodation guests.
International accommodation guests, which significantly dipped after the earthquake in March 2011, registered a rebound, reaching 9.3 million in 2013 and an increase of 17.8% from the previous year.
Japan National Tourism Organization statistics showed international visitors to Japan registering a record 10.4 million arrivals in 2013, a 24.0% increase over the previous year. South Korea was Japan’s top source market, followed by Taiwan, Mainland China and the United States. South Korea, Taiwan and Mainland China comprise approximately 65.4% of total international arrivals to Japan. Arrivals from Hong Kong and South East Asian countries, such as Singapore, Thailand, Malaysia and Indonesia, also rose in 2013. Due to the relaxation of visa requirements for Southeast Asian nationalities, inbound visitations from South East Asian countries such as Thailand and Malaysia showed an increase.
Existing Supply
Based on statistics from the Japan Ministry of Health, Labour and Welfare, Tokyo has 684 hotels with 95,878 guestrooms as at end-March 2013. As compared to March 2012, the number of hotel establishments were recorded at the same level while the number of guestrooms decreased marginally by 0.2%. This is due to the closure of older and smaller hotels which were replaced by newer and larger hotels in Tokyo.
In 2013, the majority of the new hotels in Tokyo are in the limited-service segment. Seven limited-service hotels with 1,393 guestrooms opened in 2013, including the 380-room Granbell Hotel Shinjuku and three Apa Hotels totalling 413 rooms. No full-service hotels entered the market in 2013.
Future Supply
Approximately 42 hotels or 9,813 rooms are expected to open in Tokyo between 2014 and 2016. While the majority of upcoming hotels will be limited-service hotels, a few luxury and upscale international branded hotels such as AMAN Tokyo, Andaz Tokyo and Courtyard by Marriott Tokyo Station are scheduled to open.
Tokyo’s overall hotel room inventory is likely to remain fairly constant in the medium to long term given the number of hotels which close for redevelopment or renovations every year.
Independent Market Review of Hotel Property Sector as at 31 March 2014
Hotel Market Performance
According to STR Global and JLL’s research, Tokyo’s marketwide hotel RevPAR improved by 12.0% in 2013 as compared to 2012. Occupancy levels improved to 86.2% and ADR also recorded a y-o-y growth of 7.3% at JPY15,526. Consequently, RevPAR reached JPY13,388 and was the highest RevPAR recorded after the global financial crisis. Improvements in the hotel trading performance can be mainly attributed to more inbound tourists and an improved Japanese economy.
Hotel Market Outlook
Tokyo will host the Olympic and Paralympic Games in 2020. This is likely to have a positive impact on the hotel and tourism market during the seven years prior to and during the Games. The economic impact of the Games is estimated at JPY2.96 trillion, which will benefit the travel, advertising, services, construction and commercial industries, according to the Tokyo Metropolitan Government (“TMG”).
TMG is committed to investing in the city’s tourism and transportation infrastructure in preparation for the Olympics. The existing National Stadium in Jingu area will be redeveloped into a new National Stadium with a capacity for 80,000 spectators and will be the main Olympics stadium. The Olympic village and planned venues for competitions will be primarily located in the Tokyo Bay area, where Hotel Sunroute Ariake is situated.
The government’s “Visit Japan Project”, launched in 2003, aims to attract 20.0 million international visitors by 2020. Some initiatives implemented include promotional activities outside Japan and the deregulation of visa requirements.
In terms of hotel trading performance, RevPAR growth in the short term is likely to be driven by an increase in ADR.
Occupancy is expected to be maintained at a high level while hoteliers are likely to aim for higher ADRs in 2014. Trading performances are expected to improve, driven by high accommodation demand from inbound travellers and the recovery of the Japanese economy.
Hotel Investment Outlook
Investment activities are expected to grow in 2014, stimulated by the Tokyo Olympic and Paralympic Games in 2020. Investor appetite in Tokyo remains one of the highest in the region, given the country’s open and stable economy and solid demand fundamentals. However, hotels in Tokyo are tightly held by blue-chip companies and opportunities to acquire existing hotels are limited.
In 2013, JLL recorded 10 hotel transactions in Tokyo, the majority of which were limited-service hotels with values under JPY5.0 billion. Transaction volume remains relatively small.
While the majority of hotel transactions were completed by Japanese developers/property companies and hotel operators in 2013, investment funds and Real Estate Investment Trusts (“REITs”) also showed keen interest in hotel assets in Tokyo. This has also been supported by domestic banks willing to provide loans for hotel investments.
Singapore
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Tourism Market Overview
In 2013, international visitor arrivals to Singapore totalled 15.5 million, achieving a 6.9% y-o-y growth over 2012 and in line with forecasts set by the Singapore Tourism Board (“STB”), which targeted 14.8 to 15.5 million arrivals. Tourism receipts registered a 1.6% y-o-y increase to $23.5 billion in 2013, achieving the targeted $23.5 – 24.5 billion set by STB.
An estimated 77.4% of visitor arrivals were from Asian countries including the top three source markets – Indonesia, Mainland China and Malaysia. Growth was seen across all top 10 source markets, with Mainland China and Hong Kong exhibiting the strongest y-o-y growth of 26.1% and 18.1% respectively as at YTD September 2013, due to more flight routes and capacity.
Corporate and leisure inbound travel remained strong during the year. Business Travel and Meetings, Incentives, Conventions and Exhibitions (“BTMICE”) visitors increased by 6.0% to 2.6 million while leisure visits registered a 12.0% rise to 6.7 million, as at YTD September 2013.