Asia’s growing middle class is driving a surge of mid-tier hotel investment in the region, but do travel consultants face any challenges in securing rooms in this market segment?
TOKYO – Julian Ryall
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Tokyo already faces a shortage of mid-tier hotels, a problem that is becoming more acute as the number of visitors increases sharply and is set to reach new highs with the Olympic Games 2020.
On the plus side, city authorities and developers are aware of the situation and a number of new properties with rooms around the US$200-per-night mark are due to open their doors before the world’s largest sporting event comes into town.
“There are several reasons why we have a shortfall in accommodation at the moment, but the biggest problem is the limited number of potential sites and the high prices that are being quoted for that land,” said Koji Takabayashi, managing director of Horwath HTL’s Japan office.
“This is a serious problem, especially given that the Japanese government wants to increase the number of overseas visitors to 20 million by 2020,” he added.
Domestic tour operators are also feeling the squeeze.
“It is getting harder and harder to secure accommodation and it is only going to get more difficult as we get closer to the Olympic Games,” Motohisa Tachikawa, a spokesman for JTB Corp told TTG Asia.
“The issue is particularly acute for Asian travellers because they have similar dates for their holidays, meaning there is a lot of pressure at certain times of the year,” he said. “Our clients sometimes have to change hotels, move up a hotel grade or alter the timing of their visit because there are just not enough hotels in Tokyo.”
An alternative remedy is to encourage visitors to stay in the outlying areas of the capital, such as Narita, which is close to the main airport serving Tokyo.
A recent study by the Japan Travel Bureau Foundation underlines the scale of the problem, suggesting that if inbound tourists reach the government’s target of 20 million by 2020, then Tokyo alone will have a shortage of 10,000 beds every night.
“A shortage of hotel rooms is going to be a bottleneck for inviting more tourists to Japan,” said Naoki Yoshiyama, senior director for CBRE’s hotel sector. In a 2014 report, CBRE estimated there would be a shortage of 14,000 rooms per night by 2020.
“Tokyo’s GDP is the largest in the world, but the city does not have hotel brands such as W, St Regis or JW Marriott,” he said. “Offices have traditionally been the best users of CBD real estate, while office owners in Japan strongly prefer leasing to management contracts, which is a challenge for international hotel operators.”
That lack of accommodation, however, is an opportunity for developers.
Hotel Gracery Shinjuku, which opened in April in Tokyo’s Kabukicho entertainment district, is notable for the 12m-tall head of Godzilla poking through its 30th storey roof. Other new midscale arrivals in the city include Hotel Sunroute Ginza and Richmond Hotel Premier Tokyo Oshiage.
In the summer of 2016, the Prince Gallery Tokyo Kioicho hotel is scheduled to open in the city’s Chiyoda Ward, while work is underway to demolish Okura Hotel to make way for a new property that will launch by 2019 in time for the Olympics. Hilton has also taken over a property in the Odaiba waterfront district and will be opening later this year.
According to Horwath’s Takabayashi, Japan’s major developers like Mitsui & Co and Mori Building Co are actively seeking general contractors to secure sites and build more midscale hotels before 2020.
“At the moment, a lot of travel consultants are having problems securing rooms for groups, and some are resorting to online reservations, which is a concern,” admitted Susan Ong, deputy director of the Japan National Tourism Organization’s office in Singapore.
“But we are hopeful moving forward because some new hotels are scheduled to open soon.
“Opened in March 2012, the Richmond Hotel Asakusa is a reasonably new superior business hotel in a fantastic location. The famous Kaminarimon gate and Sensoji temple are just a short walk away, and numerous restaurants are on its doorstep. The hotel is also ideally placed for visits to Tokyo Skytree, while numerous subway lines are just a couple of minutes away on foot providing easy access to Shibuya, Akihabara, Shinjuku and Ginza.” – Alastair Donnelly, Co-director and founder, Inside Japan Tours
SINGAPORE – Paige Lee Pei Qi
The continuous roll-out of midscale hotels in Singapore not only injects new supply into the industry, but also provides alternative options for travellers, travel consultants told TTG Asia.
According to CBRE Hotels (Asia-Pacific), executive director, Robert McIntosh, about 45 per cent of Singapore’s upcoming hotel supply until end-2018 will belong to the midscale sector. “The current stock of 3.5- to four-star hotels amounts to about 31 per cent of the whole supply, which indicates that there will be a significant relative growth in this segment,” he said.
“This shows the demand is growing strongly for such hotels that offer value for money, efficient service and simple, modern facilities,” remarked McIntosh.
Highlighting the appeal of the mid-tier hotel segment, Judy Lum, group vice president sales & marketing of Tour East Singapore, said: “These hotels are less intimidating to Asian travellers who prefer a casual atmosphere, and our midscale hotels here are pretty decent hotels with room amenities.”
These hotels are largely popular among travellers from regional markets like China and Hong Kong, added Lum.
Likewise, for Luxury Tours & Travel, Chinese groups form the bulk of travellers that opt for midscale hotels, said Singapore director, Michael Lee. He said: “These travellers are simply looking for a comfortable stay without all those extra comfort items, so it is suitable for them.”
Samson Tan, CEO of GTMC Travel, commented: “There is very good demand for these properties, especially from the Asian market because of its competitive offerings with affordable prices.
“I do not face any challenges in securing these rooms because I think the supply is more than the demand,” he added.
CBRE’s latest Singapore Hotel MarketView report revealed that “in light of the appreciating dollar, tourists have become more price-sensitive, thus increasing the demand for lower-tier hotels”. The occupancy rates for midscale hotels rose 2.8 per cent year-on-year to 83.8 per cent, according to the report.
The first half of 2015 saw new mid-scale hotel openings like the 443-room Park Hotel Alexandra, 557-key Genting Hotel Jurong and the 488-room Hotel Chancellor@Orchard.
In 2016, Singapore is set to welcome mid-tier properties the likes of ibis Singapore on Stevens with 528 rooms and ibis Styles @ Macpherson with 298 rooms.
“I pick the four-star Park Hotel Clarke Quay for its good location, good service, and well-furnished rooms despite being only 24m2 to 26m2. I have received good feedback on the hotel’s service and cleanliness. They have also provided timely check-in for my clients and attentive service. It may only be a mid-tier hotel but with the right service culture, guests will keep coming back for the great experience.” – Judy Lum, Group vice president sales & marketing, Tour East Singapore
JAKARTA – Mimi Hudoyo
According to inbound players in Indonesian, Jakarta has a good supply of midscale and upscale rooms with a variety of facilities and locations that meet the needs of visitors.
STR Global’s data showed that in the first half of 2015, there were 186 hotels with a total 32,181 rooms in the “middle ground” category in Jakarta. Another 12 properties are expected to open by this year-end, adding 2,416 rooms to the city.
Ismail Ali, executive director of Marintur Indonesia, said: “Unlike Bali, whose tourism majority is inbound travel, leisure business to Jakarta is not that big. The majority of hotels in Jakarta set aside up to 15 per cent of room allotment to inbound leisure business (travellers).
“As a DMC (catering to European and Middle Eastern markets) there are sufficient rooms available so far. There is a good choice of international and national hotel chains which have the facilities and the service quality to meet travellers’ demands,” he added.
Jongky Adiyasa, executive director INA Leisure, agreed there were sufficient hotel rooms for his European, Middle East and Indian markets in the upscale and upper midscale categories.
However, this was not without its challenge, commented Adiyasa. Hotel rooms could be full during weekdays when there are big MICE events in Jakarta.
Anthony Johannes, senior manager of Fokus Indonesia Tours added that Jakarta has a good choice of hotels in the upscale category suitable for his Middle Eastern market, and many of these properties have been around for many years. They usually have spacious rooms equipped with today’s standard facilities such as speedy Internet connections.
However, occupancy in the first half of the year in the upscale category was down more than 12 per cent, revealed STR Global’s data.
Matt Gebbie, director Pacific Asia of Horwath HTL, said: “The decrease in government MICE demand, corporate budget tightening and the fasting month (from-mid June to mid-July) were contributing factors.
“Improvements are expected in the second half of the year. The government budget spending is up and meetings are being held in hotels again. While it is unlikely to reach 2014 levels, it will still be an improvement when compared to the first six months of the year.”
Asked if Jakarta has enough hotel rooms in this category to cater for the next few years, Christy Megawati, business development manager of STR Global, said: “With Jakarta (still) developing its infrastructure, the opportunity for business market is still positive. Also, if we take a look at the distribution pattern of hotel development, investors are not only looking at the city centre but also spreading out to (all corners) of the city.”
“As an international hotel group, AccorHotels has the system in place, the service standard and well- trained staff. Santika Indonesia is a home-grown hotel group which has been growing not only in number of properties, but also in implementing the standard of facilities and services that meet the expectations of international travellers.” – Ismail Ali, Executive director, Marintur Indonesia
KUALA LUMPUR – S Puvaneswary
The Malaysian capital has no shortage of mid-tier hotels but price parity and a lack of clear rating system continue to be some of the biggest gripes among inbound tour operators.
Aariana Hospitality International president & CEO, Reginald T Pereira, said: “Our intelligence indicates that there are sufficient mid and upscale hotels, and occupancies of these properties hover close to 70 per cent.
“The rates need to increase to regional levels in order for the hotels to be profitable and attract more investors,” he said. “Looking at the proposed new developments of hotels, there will continue to be a sufficient hotel rooms in Kuala Lumpur.
“Moving forward, what has to be done is to increase the number of tourist arrivals and focus on attracting more MICE business in order to move rates and occupancy levels to higher levels,” added Pereira.
According to Arokia Das, senior manager at Luxury Tours Malaysia, most midscale hotels are reporting occupancy rates lower than 65 per cent so far this year due to an oversupply, resulting in “very competitive rates”.
Das added: “Many hotels in this range look for immediate results, so very often there are tactical promotions. Some hoteliers, desperate to sell rooms, give OTAs better rates than the traditional consultants or offer better rates on their websites for last-minute tactical promotions.
“Clients will (then) demand to know why our quotes are more expensive and this situation looks set to continue in 2016,” he remarked.
Like Pereira, Das urges the creation of more international MICE events in Kuala Lumpur to draw more arrivals and fill up rooms.
For some travel consultants, the lack of a unified hotel rating system in Malaysia makes it harder for them to sell rooms to their clients.
Ally Bhoonee, managing director of World Avenues, said: “One of the challenges we face is differences between the local hotel brands and the international hotel chains.
“Some local brands have been classified as five-star hotels by the Ministry of Tourism and Culture Malaysia as they have met the necessary criteria such as a minimum room size of 13m2, a beauty salon and spa, a swimming pool and 24-hour room service. Such properties are marketed as five-star but lack the appropriate service levels.
“As travel consultants, we have to professionally explain to our clients the difference between a super deluxe five-star and a deluxe five-star property as this will help them make an informed decision.
“Foreign guests who buy travel packages from tour operators overseas do not have an itemised bill, thus they do not know how much they have paid for the hotel. Hence, it is very important to brief our overseas partners, so that they in turn can brief their clients.”
In Kuala Lumpur, contract rates for mid-tier hotels generally range between RM320 (US$74.30) and RM350, sources told TTG Asia.
“Vistana Kuala Lumpur Titiwangsa – the staff are service oriented and the property is centrally located and easily accessible by public transportation. It is also a short drive to attractions such as Sunway Putra Mall and the Petronas Twin Towers. The surrounding area is also peaceful, yet near to the trendy Bukit Bintang area in Kuala Lumpur.” – Nanda Kumar, Managing director. Hidden Asia Travel & Tours
HONG KONG – Prudence Lui
Space-starved Hong Kong has constantly grappled with steep hotel rates and room shortage, vexing tourists and travel consultants alike.
“Our incentive clients from the region define middle-ground rates as around US$130,” said Alan Tang, manager of East and West Travel, which specialises in South-east Asia traffic. “As Chinese arrivals are currently not doing well, we are able to secure the midscale properties. But once Chinese travellers rebound, the shortage problem may reoccur.
“Since July 2015 we (have had) trouble booking rooms in Hong Kong Disneyland Resort. We’ve been asking for rooms this coming December but no rooms were available,” he said. “In the long term, the city needs more supply to grow tourism.”
Momentous Asia’s general manager Doris Lam told TTG Asia that her longhaul clients seek four-star properties of around US$180 to US$200, but good hotels at this rate are not easy to find, especially when their dates clash with other events in Hong Kong.
Price comparison with cheaper cities in the region pose a challenge too. “If hotel rates from other destinations offer better value for money, (clients) may pick other destinations instead of Hong Kong,” said Lam. “We hope for more supply and competition, (so that) the hotel rates become more competitive.
“Many clients also look at the terms and conditions, and cancellation policy. We need more flexibility from hotels, in particular for MICE groups. Many clients are looking for full-service hotels with proper restaurants and business centres but it seems most new hotels fail to meet the needs of these clients.”
Hong Kong Hotel Association, executive director, James Lu, said: “Mid-range hotels are always in demand and more than half of the city’s new hotels undergoing development and the existing hotel room inventory fall into this category, so there is no shortage of supply.
“Due to the current business downturn caused by fewer overnight visitors to Hong Kong, the price range has been adjusted downward by some 15 to 20 per cent but it will eventually go back to normal. In the long run, everything will balance out.”
Hong Kong’s midscale hotels generally offer standard rooms at HK$1,000 (US$129) to HK$1,500 per night, according to Lu.
According to statistics from Hong Kong Tourism Board, the city’s supply is expected to grow from 279 hotels (77,825 rooms) in 2016 to 298 hotels (82,598 rooms) in 2017, with most new properties belonging to the midscale categories located outside traditional downtown areas.
“We have used Crowne Plaza and Holiday Inn a number of times, and Novotel in China too. (These brands) are better equipped with more than one restaurant, offer a full buffet breakfast and business centre, among other facilities. When we ask for quotations, they also come up with a proper proposal with hotel descriptions that help us when we present the properties to clients.” – Doris Lam, General manager, Momentous Asia
BANGKOK – Michael Mackey
An oversupply of rooms in Bangkok has created opportunities for both inbound agencies and consumers in the midscale hotel market.
Bangkok has a surfeit of four- and five-star rooms as major international chains can be found in the city, usually in multiple locations. This has led to a severe downward pressure on rates as chains such as Hotel ibis Bangkok Riverside cost just US$50 per night with breakfast.
“Hotels in Bangkok have more challenges in filling rooms due to the oversupply,” said Zhang Yulin, China market manager for Asian Trails.
Moreover, there are still more hotels entering the oversaturated Bangkok market, which does nothing to ease the rate pressure.
“There are many new hotels which cater to the midscale budget business or leisure travellers seeking a value-for-money and conveniently located property,” said Hans van den Born, managing director of Diethelm Travel Thailand.
“There are so many new rooms coming online that you ask yourself (whether) these investors have done their due diligence,” said van den Born, who believes this situation will remain the same for the next five years.
“We don’t have any problems (securing rooms), not even in the high season,” he added.
Bill Barnett, managing director of C9 Hotelworks, noted that travellers seeking midscale hotels aim for the cheapest prices and sometimes move to get the desired rate – even on the same trip.
He added: “(There is a lot of) movement and little loyalty or in-house spend, (resulting in) a commodity war in this segment.”
”One recommendation would be the Aetas Bangkok. It has very spacious rooms, friendly and efficient staff, a small swimming pool, various F&B outlets – basically everything you need for a few days stay in the capital of Thailand.”
– Hans van den Born, Managing director, Diethelm Travel Thailand
MANILA – Rosa Ocampo
With Manila’s mid-range hotels varying greatly in rates and facilities, the Philippine trade opposes categorising hotels according to their rates and should instead be based on the standard of their facilities and amenities. A property with five-star facilities can be rated four-star and vice versa, resulting in a big gap between a hotel’s actual and OTA rates.
Metro Manila is also susceptible to wide rate fluctuations so it is not uncommon for a five-star hotel to downgrade to a four-star during the low season, and for a budget hotel to upgrade its prices to a four-star level during the high season.
The danger of categorising hotels based on pricing is that a property might not meet guests’ expectations and lead to disappointment, travel consultants opined.
Paul So, managing director, Great Sights Travel and Tours, remarked that in the midscale pricing category, facilities and amenities are “not very clear cut” and often fail to meet consumer expectations. A common complaint is the lack of or slow Wi-Fi, which is an issue for the entire hotel industry in the Philippines and even luxury hotels are also not spared.
Some mid and upscale hotels drop their rates too low, while some lack basic amenities like having hot water for coffee or tea, further adding to the disparity of service and facility standards in the segment.
Categorising hotels based on rates is therefore not the best criteria, argued Perry Perez, team manager of Hana Tour, who said his company has its own standards in choosing hotels.
Manila generally has enough supply of mid and upscale hotels that range from 7,000 pesos (US$150) to 8,000 pesos. But it can be tricky during the high season and convention months when supply becomes scarce, said Jerome Coronado, inbound supervisor, Swire Travel Philippines.
However, residences are growing in popularity in the metro area, offering a fitting alternative to mid and upscale hotels, said Coronado.
According to the Department of Tourism’s statistics, mid-market hotels currently comprise about 30 per cent of total supply in Manila. Most new and recent hotel developments are in the five-star bracket, augmenting their supply to about 60 per cent of the total hotel pie.
While Philippine brands like Henann, Linden and Crimson fill up the mid-market segment, international brands are noticeably lacking. However, that is about to change with the influx of mid-market hotels over the next few years, including boutique, local and international brands.
“New World Hotel Makati is reasonably priced for its level of services and facilities. It is considered five-star but the price is four-star. It offers quality in terms of services, amenities and food. It keeps upgrading and renovating.”
– Angel Ramos Bognot, President and managing director, Afro-Asian Travel and Tours
