Travel consultants are set to enjoy greater choices from more openings in Manila, continuing low room rates in Bangkok and Jakarta, prospects of lower rates in Kuala Lumpur and New Delhi, and possible service and product upgrade in Hong Kong and Singapore. Here’s your guide to the five-star market in seven key Asian cities
BANGKOK
Supply overview
As at end 1H2013, there were 23 luxury hotels in Bangkok with a total of 6,800 rooms, up 12 per cent from the same period last year, according to CBRE
Thailand. Hilton Sukhumvit Bangkok and Park Hyatt Bangkok are due to open in the coming months, while Waldorf Astoria Bangkok and Edition Hotel Bangkok are due in 2014 and 2015 respectively.
According to Jones Lang LaSalle (JLL), most of the 5,918 rooms to come online in Bangkok from now until 2015 will be concentrated in the upscale and luxury segments, the latter comprising 36.9 per cent or more than 2,180 keys.
Andrew Langdon, executive vice president-Thailand and Indochina at JLL’s Hotels & Hospitality Group, said: “The market has seen a strong recovery in international tourism arrivals over the last two years on the back of a return to political stability. The anticipation is for the strong demand recovery to continue over the next few years. The expected growth in room supply, particularly in 2013, should be absorbed by continued recovery in demand.”
Demand overview
Luxury hotels in Bangkok performed strongly in 2012 with RevPAR rising to 3,396 baht (US$108.14), up 25.3 per cent from the year before, according to JLL. It rose a further 6.9 per cent to 3,987 baht during the first five months of this year, while average occupancy climbed 3.7 percentage points to 68.4 per cent. However, ARR nudged up a mere 1.2 per cent to 5,832 baht, compared with the same period the previous year.
While RevPAR currently remains below par, James Pitchon, executive director of CBRE Thailand, said: “It looks like the rate of supply (of new hotels) is finally starting to slow, so we’re expecting a record high season this year and we may start seeing room rates rise soon. Of course, that depends on whether rooms have already been contracted out or allocated at current market prices.”
Key challenges
Bangkok offers the lowest luxury hotel room rates in Asia, outside of Malaysia. The fact that one can stay in a Bangkok luxury property for a third of the cost of a hotel run by the same brand in Singapore or Hong Kong is great news for tourists. However, it dampens the sector’s earnings.
Pitchon said higher operational expenses, especially labour costs, would weigh on the sector’s bottomline, especially if properties maintained their current rates in a market where the local currency had weakened against the greenback and sterling in recent months.
The city’s over-reliance on key mass markets such as Russia and China also poses a risk to the accommodation sector’s profit.
HONG KONG
Supply overview
As of 1H2013, there were 34 properties (17,522 rooms) in the High Tariff A category.
According to Victor Chan, chairman of Hong Kong Hotel Association, the number of luxury hotels in Hong Kong has not changed in the last couple of years, and the overall business environment in the city is not expected to cause noticeable fluctuations in the sector’s performance.
Currently, the conversion of Murray Building into a luxury hotel is expected to take a few more years to complete, while another new hotel might be expected at Disneyland.
Yet another, Rosewood Hotel, was also under construction, added Frank Sorgiovanni, vice president of Research Asia, Jones Lang LaSalle, who also expects no major new developments in the short-to-medium term in the five-star sector.
Demand overview
According to Hong Kong Tourism Board (HKTB), in 1H2013, High Tariff A category hotels registered an average occupancy of 84 per cent, up two per cent compared with the same period in 2012, and ARR of HK$2,368 (US$305), down 2.3 per cent.
Sorgiovanni projects strong arrivals from China to continue, but points out that arrivals from the majority of short- and longhaul markets are declining, based on latest data released by HKTB.
“Trading performance has been weak as at May 2013, but gaps in MICE demand are expected to be filled by strong Chinese leisure demand that typically arises in 3Q2013. Given the benign supply scenario in Hong Kong, upscale and luxury hotel performance is expected to remain stable.” he said.
Sherona Lau, director of marketing at The Peninsula Hong Kong which has just completed a major renovation, shared: “We were able to maintain the top RevPAR position in the city from 2012 until early 2013, showcasing a 22 per cent increase, with ARR up by 14 per cent. As we are now working with a full inventory, we expect a healthy performance, subject to the usual market conditions.”
Key challenges
Manpower remains the key challenge for Hong Kong as it impacts the consistency of high service standards. Chan said that staff turnover and the changing work habits of the new generation also made human resource management more difficult.
He summed up: “It’s about recruiting, training and retaining talented staff, which in today’s environment requires a great deal of leadership and management. F&B is another area where competition among new signature restaurants for the best chefs is ever increasing. Overall, operating costs are rapidly rising and profit margins are under pressure.”
JAKARTA
Supply overview
Room inventory growth for upscale accommodation in Jakarta has been minimal in the last decade. The city currently has 13 luxury hotels, with 3,773 rooms. However, in view of Indonesia’s growing economy, at least seven new luxury properties are expected to enter the scene within the next three years, adding nearly 1,900 rooms.
Both Raffles and Fairmont Hotels & Resorts will debut in the city, with the 180-room Raffles Jakarta targeted to open this year and the 488-room Fairmont Jakarta, Senayan Square next year. Marriott International will add the 275-room JW Marriott Jakarta Kemang Village (2014) and the 208-room JW Marriott Jakarta West St Moritz (2015), while the 480-key InterContinental Jakarta Pondok Indah Hotel & Residences will open in 2015. Starwood Hotels & Resorts will follow with its 250-room W Jakarta and 125-room St Regis Jakarta, both in 2016.
Demand overview
Average occupancy has been stable in the last three years at about 64 per cent, while ARR and RevPAR in 2011 and 2012 saw double-digit growths, according to STR Global.
In 1H2013, ARR grew 9.5 per cent and RevPAR, 12.9 per cent, compared with the same period last year, the highest growth rate in South-east Asia. As at June, the year-to-date ARR was US$192.09 and RevPAR, US$124.29.
The Ritz-Carlton Jakarta, Pacific Place saw a successful first half and expects business to be strong till the final quarter. Grand Hyatt Jakarta is upbeat about the second half, noting a significant rise in rates and the market’s buying power this year. C9 Hotelworks managing director, Bill Barnett, notes that Jakarta’s hotel rooms are relatively underpriced. Citing STR Global’s data 2012, he said Jakarta’s RevPAR was similar to Bangkok’s US$90, lower than Kuala Lumpur’s US$94 and Manila’s US$99, and way behind Singapore’s US$234.
Key challenges
Barnett said Jakarta hotels were business-centric, so they needed to lower rates to fill rooms on weekends. He added that rates of the upper tier would not move up much “until Jakarta can diversify with a convention centre, strong infrastructure or demand generators like world-class amusement parks”.
Jakarta hoteliers are also seeing infrastructural limitations and increasing costs of labour and electricity.
Barnett said the future game changers would be the mass rapid transit and the skytrain the Jakarta government was now working on.
NEW DELHI
Supply overview
According to HVS India, New Delhi is the second largest hotel market in the country in 2012/13, after Mumbai. It has around 11,500 rooms, of which 60-65 per cent are luxury and upscale.
Vivek Shukla, general manager of The Lalit New Delhi, said the supply of luxury hotels had been stable in general for the last few years.
Going forward, HVS India’s chairman, Manav Thadani, tracks close to 6,000 new rooms being planned for the next five years, with luxury and upscale hotels accounting for 40 per cent of this proposed supply.
Some of the new hotels to open include JW Marriott, MGM, Aloft, Dusit D2 and Hyatt’s new brand, Andaz. All these hotels are part of the Delhi Aerocity project.
Demand overview
According to HVS India, the average occupancy rate of Delhi’s luxury and upscale hotels in 2012/13 was about 60 per cent, with ARR at Rs8,000-8,500 (US$132-US$140). These hotels recorded a marginal decline in occupancy and a six to seven per cent decline in ARR in 2012/13 over the previous year.
The Lalit’s Shukla said currently, the average occupancy of luxury hotels in the city was 53.7 per cent while ARR and RevPAR stood at Rs8,362 and Rs5,000, respectively.
He said: “There has been a marginal increase in occupancy. However ARR has shown a decline of four to five per cent over last year.”
Key challenges
Industry players said the depreciating rupee, rising inflation and economic downturn in European countries had dulled business a little.
Gitanjali Singh, head-sales of The Royal Plaza New Delhi, said: “Rising costs and a decline in occupancy and room rates will shrink operating margins by 16-20 per cent in 2013 and 2014.”
In the last two years several high-end hotels have opened in East and West Delhi. Coupled with additions to supply in Gurgaon and Noida, traditional city-centre hotels have thus seen demand bottoming out. This trend is expected to continue in the short-term.
Going forward, the pressure on occupancy and ARR over the next two to three years remains imminent with the entry of the Aerocity hotels.
KUALA LUMPUR
Supply overview
According to the Malaysia Association of Hotels (MAH), as of May 2013, there were 25 five-star hotels in Kuala Lumpur providing a total of 10,544 rooms.
Ganneesh Ramaa, manager of Luxury Tours Malaysia, said: “Over the last few years, the trend has been the opening of more five-star hotels rather than the lower-category hotels in the city.”
Moving forward, inventory for the five-star category is expected to increase by 12.2 per cent, or an additional 1,283 rooms between 2014 and 2016. New brands debuting in Kuala Lumpur include St Regis Kuala Lumpur, scheduled to open in December 2014 with 208 rooms and 160 residences; Banyan Tree Signatures Pavilion Kuala Lumpur with 50 suites, scheduled to open in 2015; and W Kuala Lumpur with 150 rooms, scheduled to open in 2016.
Adam Kamal, managing director of Tina Travel & Agencies, said these new brands would grow the number of meeting spaces.
He added: “It is also a bonus that these hotels are located a short distance from the Kuala Lumpur Convention Centre, which would help the destination attract more high-end conferences.”
Demand overview
According to MAH, the average occupancy of five-star properties in Kuala Lumpur in 2012 was 71.6 per cent, while their ARR and RevPAR were RM297 (US$93.75) and RM213 respectively. In 2011, average occupancy stood at 74.5 per cent, ARR at RM315 and RevPAR at RM235. Up-to-date statistics are not available as MAH is no longer collecting them due to the Competition Act.
But going forward, Christina Toh, MAH’s vice president, expects a positive outlook for all hotels in Kuala Lumpur, as Malaysia Airlines, AirAsia, AirAsia X and Malindo Air continue to expand their network from their hubs in Kuala Lumpur International Airport. Average occupancy is expected to rise with an expected increase in arrivals from India, China, South Korea, Australia and Dubai.
Key challenges
Anna Olsson, director of sales and marketing at YTL Hotels, said: “The main challenge would be the ever-increasing competition from neighbouring countries, particularly from Bangkok whose MICE initiatives are becoming strong. Locally, stiff competition is also expected with the addition of more five-star properties over the next few years.”
Another hotelier said five-star hotels in the city tended to drop rates to capture the MICE business. The source said: “As a result, the gap narrows between five- and four-star hotels. Once rates drop, it becomes difficult to raise them again.”
Luxury Tours’ Ramaa said the service level of front-office and F&B personnel of some five-star hotels was not up to five-star standard due to inadequate training.
Manfred Kurz, managing director, Diethelm Travel Malaysia, agreed: “There are many independent hotels in Kuala Lumpur that have received a five-star rating, but (their service standard) does not befit this category and are thus disappointing to tourists.”
MANILA
Supply overview
Manila’s luxury hotel sector is growing at an unprecedented rate as the Philippines continues to enjoy economic and political stability. Data from the Department of Tourism (DoT) show that from 22 deluxe properties last year, Metro Manila now has 26, augmenting room inventory by 12.4 per cent, from 9,040 the previous year to 10,165 rooms this year.
Newcomers 500-room Solaire Hotel & Casino, 280-room Fairmont Makati and 32-suite Raffles Makati debuted in the first quarter while the 313-room Marco Polo Ortigas will be launched late this year.
Deluxe rooms are projected to expand by nearly 50 per cent to over 5,000 rooms by 2017. Of the glitziest will be the four integrated resorts at the Entertainment City. Aside from Solaire, which will open 300 more rooms next year, each of the three resorts will build a minimum of 800 hotel rooms by 2017.
Within the Bonifacio Global City (BGC) business district, the Ascott BGC service residences will open next year, followed by Grand Hyatt and Shangri-La at The Fort in 2015.
In Makati, Worldhotels and Residences will debut next year while Movenpick Hotel & Residences is targeted for opening in 2016. Newport City near NAIA will have a Hilton and a Sheraton by 2016.
Demand overview
Manila’s hotel industry showed mixed results in 1H2013, according to STR Global. Average occupancy dropped to 69.6 per cent from 73.9 per cent in 1H2012. However, ARR stood at US$138.76, or 6.3 per cent more than US$130.57 in 1H2012.
While the expanding hotel supply could have caused the drop in average occupancy, hotels nevertheless were able to maintain – and even increase – their ARR. Influenced by the occupancy and ARR, RevPAR increased ever slightly by 0.1 per cent to US$96.81, from US$90.59 a year ago. Eugene Tamesis, director of sales and marketing, Raffles Makati and Fairmont Makati, said the rising RevPAR could be attributed to “stronger demand from the business segment, leisure travellers and domestic tourism or ‘staycation’ bookings especially on weekends, helping boost the demand during otherwise quiet periods”.
For the rest of the year, RevPAR is expected to continue rising on the heels of the latest DoT report which shows a year-on-year 10 per cent growth in foreign arrivals.
Key challenges
Since a substantial number of hotels in the pipeline are also coming from the mid-market segment, the challenge is growing competition between deluxe and four- and even three-star hotels.
“There’s not much difference between the published rates of deluxe and four-star hotels and the gap will be narrower,” said Karlo Pobre, manager of research and advisory services, Colliers International.
Pobre added DoT’s It’s more fun in the Philippines brand was directed more at middle-income leisure travellers who were inclined to stay at limited-star hotels.
Tamesis cited infrastructural challenges, especially the need to address Manila’s congested international airport if the country’s arrival targets were to be achieved.
SINGAPORE
Supply overview
As per OCBC Investment Research report published in June, as at end 2012, 57 per cent of the total hotel supply in Singapore belongs to the upscale and luxury tier, with a total of 28,845 rooms. The report forecasts another 3,981 upscale/luxury rooms from 2013 to 2015 and growth of 4.4 per cent per annum during this period.
One new property is Patina Hotels & Resorts, a luxury hotel chain, which will debut with a 157-key property in The Capitol, Singapore end-2014. Other upcoming developments in the next two years include The Westin, Sofitel So and an extension of Raffles Hotel.
Frank Sorgiovanni, vice president of Research Asia, Jones Lang LaSalle, said: “The proportion of five-star rooms has been down in recent years, with midscale and upscale (properties) seeing stronger demand. We forecast 633 five-star rooms over the next 12 months. One entrant is the 301-room Westin Marina Bay, opening end-2013.”
Demand overview
As per Singapore Tourism Board’s (STB) preliminary statistics for January to April, ARR for luxury hotels moved up slightly to S$423 (US$334), from S$421 last year. RevPAR rose to S$372, from S$344, while average occupancy registered 88 per cent, up from 82 per cent.
Chuck Abbott, regional vice president-South-east Asia of Starwood Hotels & Resorts, said Starwood hotels in Singapore had seen a steady increase in occupancy in the last few years and with the growth of the middle class in Asia-Pacific, the group had confidence in the Singapore market.
Similarly, Peter Mainguy, general manager of The Ritz-Carlton, Millenia Singapore, said the hotel’s ARR and RevPAR had been on the rise since 2010, adding that there was a large demand for luxury travel from emerging markets such as China and India.
Alicia Seah, senior vice president of marketing and PR, CTC Travel, said: “The luxury hotels in Singapore appeal especially to FITs and incentive groups as normal tour groups find the prices too high.”
Key challenges
Heng Li Lang, director of hotels, STB, highlighted manpower crunch as the key challenge.
“Luxury hotels have the delicate task of optimising lean manpower without compromising service standards,” Heng said, suggesting that hotels explore innovative ways to improve efficiency.
Another challenge, Mainguy opined, was the need to continually refresh the hotel’s products and services to live up to the five-star standard.
For Abbott, Singapore’s hotel prices can be a stumbling block. He said: “There is some price resistance when competing against destinations such as Bangkok. Our priority is to focus on personalising guests’ experience and maximising the overall value for them.”
Additional reporting from Prudence Lui, Mimi Hudoyo, Rohit Kaul, Rosa Ocampo, Lee Pei Qi
