According to CBRE, the hotel market in the Asia Pacific region is undergoing significant structural changes. Hotel owners and operators are adjusting their operational and branding strategies in response to increased labor and utility costs, limited new supply, and the extended peak of the interest rate cycle.
Major global hotel operators are expanding rapidly in the region. Nearly half of the new hotels in the development pipeline are being developed in partnership with five major hotel groups: Marriott (60,566 rooms), Accor (47,052 rooms), IHG (34,227 rooms), Hilton (31,606 rooms), and Wyndham (21,455 rooms). These operators are investing heavily in loyalty programs and niche segments to capture market share while significantly enhancing their technological capabilities.
Despite prolonged high interest rates worldwide, hotel investment in the Asia Pacific region has remained resilient. This is driven by continued interest in Japan and Australia, a record-breaking year for serviced residence sales in mainland China, and a steady flow of deals in a strong Korean market.
Asia Pacific Key Hotel Trends in 2024
Elevated Daily Rates Due to Limited Supply, High Demand, and Rising Labor Costs: Hotels have adapted to lower levels of applicants and staffing, but new labor-related issues remain a challenge. This challenge is expected to persist throughout 2024, prompting operators to maintain high daily rates to offset some of these losses.
Aggressive Expansion by Major Global Operators, with a Focus on Lifestyle Brands: The top five operators have increased their global market share from 20% to 24% over the past six years, and this trend is expected to continue. A significant part of this strategy includes expanding into the lifestyle sector, driven by brand loyalty programs, avant-garde design, and wellness initiatives.
Robust Investment Despite Debt-Related Challenges: Despite ongoing capital market dislocation, the upscale+ segment has emerged as the most attractive segment for hotel investors in Asia Pacific. This is due to the growth in global wealth and travelers' willingness to spend more on accommodation following prolonged border closures during the pandemic.
Continued Adoption of Sustainability/ESG Initiatives: The Asia Pacific hotels and hospitality industry's commitment to ESG initiatives is gaining momentum. Rising energy costs, which have significantly increased since the pandemic, along with a further commitment to ESG initiatives, are accelerating the industry's focus on sustainability. Other supportive factors include a shift in guests' preferences toward more sustainable tourism and growing demand for disclosure around climate risk.