Market Snapshot: Asia Pacific 2022

Hok Yean CHEE | August 15, 2022

By Hok Yean CHEE

In 2021, transaction activity in the Asia Pacific recorded a strong recovery, achieving a transaction volume of approximately USD13 billion worth of hospitality assets, indicating a 47.7% growth year-on-year. Similarly, from 3Q 2021 to 2Q 2022, transaction activity in the Asia Pacific has continued to escalate by 16.8% compared to 3Q 2020 to 2Q 2021. Specifically, growing interest in hospitality assets continues to be observed in markets such as Hong Kong SAR, China, Japan, Indonesia, Thailand, Singapore, and certain markets in the South-East Asia regions.

Australia, New Zealand, and South-East Asia saw an upswing mainly attributed to the reopening of international borders and dropping of COVID-19 restrictions which revitalised international travel and enhanced market performance growth. Improvement was also observed in North Asia as many investors would like to take the opportunity to purchase valuable hospitality assets at a discounted price during the pandemic. Investment interest is anticipated to pick up even more in the second half of 2022 as investors continue to seize opportunities to tap on the gradual recovery of the tourism sector, albeit with a cautious approach.

Transaction History in the Asia Pacific (2017 – 2Q 2022)

Source: HVS Research

Top Three Most Active Markets (3Q 2021 to 2Q 2022)

Both transaction activity by the number of completed transactions and transaction volume for hospitality assets is observed to rapidly increase over the last four quarters (3Q 2021 – 2Q 2022) in Hong Kong SAR, Thailand, and Singapore. In particular, Hong Kong SAR has seen transaction volume increase six times from USD0.2 billion to USD1.3 billion with 12 hospitality assets traded hands. The strong investor appetite is mainly contributed by foreign investors.

Transaction Volume in Top Three Most Active Markets (3Q 2021- 2Q 2022)

Source: HVS Research

Major Investors in the Asia Pacific

In 2021, transaction activity from the top ten investors in the Asia Pacific accounted for approximately USD2.96 billion or 24.1% of total transaction volume. The majority of the transaction volume by the top ten investors are local investments (investments in the country of origin), representing approximately USD2.4 billion. Despite the coronavirus pandemic, there is an increasing interest from foreign investors. In terms of the transaction activity by the number of transactions, Japan-based Kenedix tops the list with ten deals in Japan while US-based Blackstone recorded eight in Japan. This is followed by India-based Express Group of Hotels which recorded seven in India. China-based Ping An Insurance, South Korea-based One Holdings Co, Hong Kong-based Sure Spread Limited, and Japan-based APA Group have each recorded five in 2021.
Top Ten Investors

Source: HVS Research

Hotel Performance in the Asia Pacific (2022)

Overall hotel performance across the tracked markets in 2022 is anticipated for a recovery phase from the impacts of the COVID-19 pandemic. Most tracked markets emerge to be more resilient and rebound faster due to earlier ease of Covid restrictions and reopening its borders to travelers after successfully controlling the spread of the coronavirus and extensive tourism sector support from the government. On the other hand, China markets face more challenges due to the zero covid approach, which includes prolonging strict lockdown, travel restrictions, and social distancing measures.

The top five market growth in hotel performances are Bali, Phuket, Bangkok, Kuala Lumpur, and Ho Chi Minh City, while static markets are Shanghai, Beijing, and Auckland. In general, hotel performance in Southeast Asia is forecasted to improve from 2021. The overall sentiment in Myanmar seems to be bearish due to the aftermath of the military coup. Similar to the case of the Maldives tourism recovery, resort locations are anticipated to rebound relatively faster as the pent-up demand from overseas is evident from the rapid growth of hotel performances in resort destinations as of YTD June 2022.
Hotel Performance in the Asia Pacific (2022)

Source: HVS Research

Australia

Key Points

Tourism contributed 4.7% to GDP in 2021, down from 9.3% in 2019
3.0% Real GDP growth is expected in 2022
700 thousand international tourist arrivals were recorded in 2021

Highlights

COVID-19 Cases

Total Cases: 8,164,673
Active Cases: 247,128

Number of COVID-19 Cases (July 2021 – June 2022)

Source: Our World In Data; data as of 30th June 2022

Infrastructure Projects

AUD5.3 billion construction of Sydney West Airport by 2026
AUD10 billion Melbourne Airport Rail Link to connect to entire Victoria state by 2029
Third runway construction for Melbourne Airport by 2030

Notable Upcoming Hotel Openings in Sydney and Melbourne (2022)

Top 3 Largest Inventory

Meriton Suites Melbourne, 298 keys
388 William, 288 keys
MOXY South Yarra, 180 keys

Notable Transactions

587-key Hilton Sydney transacted at AUD530 million (AUD903k/key) in May 2022
59-key Hotel Lindrum transacted at AUD50 million (AUD847k/key) in Mar 2022
436-Key Sofitel Wentworth Sydney transacted at AUD315 million (AUD722k/key) in Mar 2022

Demand

In 2021, total tourist arrivals contracted marginally by 0.2% year-on-year. While international arrivals have decreased by 85.4%, domestic arrivals have increased by 21.2% in 2021. As of year-to-date (YTD) May 2022, international arrivals have increased 784.5% as the Australian government moved towards ‘live with COVID’ in November 2021 and opened its international border in February 2022. Leisure, corporate and group travellers have been returning to Australia with various large-scale events and conferences occurring in Australia.

Supply

*Include non-branded hotels
Source: HVS Research
HVS has noted that there will be 124 additional hotels with approximately 21,906 keys by 2026; 17 properties with a total of approximately 2,760 rooms will open by the end of 2022.
Hotel Pipeline (2022 – 2026)

*Exclude non-branded hotels
Source: HVS Research

Hotel Performance

Source: HVS Research
As of YTD June 2022, hotel occupancy in Sydney and Melbourne increased by 10.9 percentage points (p.p.) and 12.0 p.p y-o-y, respectively. Sydney’s ADR and RevPAR increased by 21.4% and 50.4% y-o-y. Similarly, Melbourne’s ADR and RevPAR increased by 33.4% and 71.4%. Australia has welcomed international travellers since February 2022, which has improved the occupancy and ADR.

Transactions

From 2017 to YTD June 2022, New South Wales has recorded the highest transaction value, amounting to 45% of the total amount in Australia. This is followed by Queensland with 21% and Victoria with 21%. Transaction levels in 2021 recorded a 129% y-o-y increase. As of YTD June 2022, the total transaction volume has reached AUD2.3 billion with large portfolio sales including Travelodge Australia Hotel Portfolio sale.

Transaction Value Recorded By Region (2017 – YTD Jun 2022)

Source: HVS Research