Hotel sector on rebound

Business Asia, May 31, 1999

The tide is turning for property investors in Asia, with a new report designating capital cities such as Seoul and Bangkok as "hot" markets for 1999.

The Jones Lang LaSalle Hotels' Asia Property Digest found that an expected rise in Asian hotel sales -- fuelled by lower prices during the region's financial crisis -- did not eventuate. Only eight hotels, or 0.02 per cent of the total Asian inventory, changed hands in 1998.

By contrast, 745 hotels were traded in the United States and 30 in the United Kingdom.

Of the small number of recorded acquisitions in 1998, all but one were purchased by local investors. However, the worst may be over.

Jones Lang LaSalle (JLL) vice-president of marketing and research Ms Melinda McKay said Asia's future looked positive.

"Asia's immense potential in the five-year term should not be underestimated," Ms McKay said.

"With two-thirds of the world's population domiciled in the region, Asia's hotel industry will recover its global position as a dynamic profitable industry."

The Asia Property Digest found the "hot" markets for 1999 were Seoul (South Korea) and Bangkok and Phuket (Thailand).

The report said these economies were expected to record positive real gross domestic product growth this year, leading to greater domestic demand.

These markets enjoyed positive growth in international visitor arrivals in 1998 despite the overall slow-down in the region.

Ms McKay said the limited supply of new rooms in markets such as Seoul, coupled with hard-hitting tourism marketing campaigns by tourism agencies such as the Tourism Authority of Thailand, would help lift hotel occupancy levels.

According to the report, demand for rooms has not kept pace with supply growth in Asia, leading to a declining overall occupancy profile since 1994.

The decline worsened during the financial crisis, with all markets, except Japan, recording further drops in occupancy in 1997 and 1998.

The report also found the listed hotel market in Asia suffered from contracting tourism demand during the crisis. Most stocks were trading at discounts to net asset value and listed hotel market's net return on equity (ROE) fell from 6.3 per cent in 1996 to 4.5 per cent in 1997.

A recovery is expected for 1998 when figures are confirmed, with net ROE likely to rise to 5.0 per cent and remaining static in 1999.

Top 20 Hotel Operators RANKED BY ROOM NUMBERS IN ASIA

Rank   Company Name                        Rooms    Properties

  1    Starwood Hotels & Resorts           20,366       54
       (Includes: Westin & Sheraton)
  2    Holiday Hospitality Worldwide       20,195       77
  3    Accor Asia Pacific Corporation      18,049       86
  4    Shangri-La Hotels & Resorts         17,613       37
  5    Marriott International              15,452       41
       (Includes: Renaissance,
       Ramada, Ritz Carlton)
  6    Prince Hotels                       14,171       27
  7    Nikko Hotels International          11.704       34
  8    ANA Hotels International            11,672       35
  9    Hyatt International                 11,506       28
       (Includes: Asian Hotels in India)
 10    Hilton International                10.011       21
 11    InterContinental Hotels              6,625       13
 12    Amtel Hotel Group                    6,625        3
 13    Tokyu Hotels                         6,419       20
 14    Pan Pacific Hotels & Resorts         6,314       15
 15    Dusit Thani Hotels & Resorts         6,056       21
 16    Radisson Hotels                      5,722       17
 17    Century International Hotels         5,308       19
 18    Meritus Hotels & Resorts             5,127       11
 19    Indian Hotels (Taj Group)            5,062       48
 20    Meridien Hotels & Resorts            4,736       12

Source: Jones Lang LaSalle Hotels