The results are in from the most recent BHN Hotel Investment Asia Survey.
Not surprisingly, some air has come out of the balloon that in recent years was only going one direction for most of Asia – up! In fact, some of the bigger, more mature Asia Pacific markets like Japan, Korea, and Australia are starting to look more similar to some formerly hot markets like India and China.
To set the stage, the survey asked which way the respondents believed the economy would be trending in January 2014 in some of the world’s major markets, which included China, India, Europe, and the U.S. The survey response choices were simple: Would the economy be trending up, be flat, or be trending downward? The clear ‘optimism’ winner was the U.S., with two-thirds of survey respondents believing that the economy will be trending up in January 2014. This is double the score from the previous year for the U.S., when asking the same question, and it is indicative of the improving economic conditions in the world’s largest economy.
India bested China again this year, although the belief that the economy would be trending upwards slid in both countries to 35% and 25% respectively. Not surprisingly, Europe trails the pack, coming in with 15% of survey respondents believing the economy will be ‘trending up’. While meager, this represents a fifty percent improvement over last year’s results. More importantly, more than half of the respondents believed that economic growth would be ‘flat’ in Europe next January, whereas a year ago 63% were expecting things to continue to deteriorate. The respondents seem to believe that the economy in Europe is starting to finally turn around.
To understand the perspective of the investment community and how the opportunities in the region compare, we asked the survey respondents to tell us if they thought the industry today was more lucrative, less lucrative, or the same as it was ten years ago. The clear winner is Southeast Asia, where over 75% of respondents believe that this region was ‘more lucrative’ today than 10 years ago. China and India were a distant second and third, with 50% (+/-) feeling this way. In the same survey question last year, all three were closely clustered around 60%, with China holding a slight lead. The big take away is that optimism is still very strong in Southeast Asia, while the views about the opportunities in Asia’s two biggest countries, while remaining healthy, have slipped.
A different story is emerging from some of the more mature markets. While still at the bottom of this poll, Japan’s ‘more lucrative’ results nearly doubled from only 14% last year to almost 28% this year. Korea and Australia/New Zealand also improved in the eyes of survey respondents.
How confident are the respondents about seeing more investment opportunities over the next 12 months compared to the last 12 months? In summary, nearly 70% or more of the respondents were somewhat or very confident of seeing more opportunities over the next 12 months throughout Asia. Continuing the trend of optimism about Southeast Asia, 94% are either very confident, or somewhat confident that opportunities will increase in this region. In fact 52% were ‘very confident’ of this expectation. The second most ‘very confident’ expectation was for China, at a distant 24%. India was the least optimistic, with 37% ‘not confident’ about seeing an increase in opportunities. With a sluggish economy and the weakened Rupee, this lack of confidence in more opportunities is not surprising.
Another consistent finding was that for the second year in a row, 82% of the survey respondents believe that Southeast Asia will see an increase in money provided for new construction. Korea jumped ahead of India and was the only other country where more than half believed there would be an increase in money available for development. For the rest of the region the expectations are for flat or decreasing amounts of money for new construction. The outlook for Japan improved with 42% believing there would be ‘more’ money, which is not that different from India (49%) and China (48%) this year. In summary, the development outlook has clearly slowed in the two big countries (China and India), but Southeast Asia is still hot.
The results of the survey question about RevPAR growth expectations over the next 12 months showed a huge plurality in Southeast Asia (77%) and slightly positive RevPAR expectations in Japan (53%) and Australia/New Zealand (50.3%). The majority view for the other three countries measured (India, China, and Korea) was for flat or negative RevPAR, which suggests a tough year ahead for owners and investors. Five of the six regions measured in this survey are expecting lowered numbers when compared to last year, with only Japan showing slight improvement. By way of comparison, a similar survey conducted three months ago for the Americas showed a totally different outlook on the other side of the Pacific Ocean. The outlook in the U.S. is very positive (92% expect positive growth in RevPAR), followed by Canada (81%), Mexico (78%), Central America (77 %), and the Caribbean (73%).
Despite the air coming out of the balloon in China and India, approximately 74% of the respondents expect their company to grow in 2013. This is somewhat lower than the answer to the same question from a year ago, when the answer was 81%. Like many of the numbers reported in the survey, there are some bright signs along with caution signs in Asia. Most respondents are expecting their company to grow, albeit just a little slower then they believed a year ago.
We asked what cities were ‘hot’ spots for investment in 2013 and the top five cities were: Jakarta, Yangon, Manila, Bali, and Seoul. Coming in closely at sixth was Tokyo, another sign that Japan may be getting back in the hotel investment game.
Complete survey results appear in the current issue of HOTELS’ Investment Outlook magazine.