Asia Pacific Hotel Industry Remains Resilient; ARR Up

The latest interim Hotel Survey from Hogg Robinson Group (HRG) shows evidence of Asia Pacific’s hotel industry remaining resilient with an overall increase from 2012.

Average room rates (ARR) have increased in [31/35] out of the top 50 cities, where Singapore saw a 4% growth in ARR in terms of GBP.

Margaret Bowler, Director, Global Hotel Relations at HRG said, "The early sign of recovery in hotel prices is encouraging, what is a surprise however is that in certain key cities the rates are not as high as the market had expected – in many cities this is attributed to new supply. On the whole occupancy is increasing faster which, coupled with continued high demand, means we will be likely to see rates climbing in certain markets in the second half of the year and beyond."

"Once again we can see from the survey that regional trends are becoming less relevant than they were four years ago, with significant variance across regions. Interestingly the survey also shows the rise and rise of the megacity - 11 of the top 50 cities by room rate are also classified as megacities – and we are clearly beginning to see some marked differences between these and other cities that are popular business destinations," Ms. Bowler added.

"The megacities are all showing strong growth driven by a number of common features. Megacities benefit from a combination of classic business travel and high conference and exhibition traffic. They also boast a good market for tourism and have specialised centres for industry segments such as oil and gas for instance. With the advantage of being able to cater for a variety of requirements, megacities can attract a more diverse range of business."

Despite Singapore and Hong Kong not being megacities, their positions within the top 20 most expensive hotel room cities were maintained.

"In comparison, other cities that are simply popular business destinations are subject to the general trend of the market and the consequences of wider economic pressures that would influence fluctuations in demand for example. Some of the city positions in the top 50 league table reflect capacity and the availability of room space; limited new openings result in higher room rates (Moscow for example) whilst a number of new hotel developments results in a competitive rate market (as seen in Abu Dhabi)," Ms. Bowler said. "Clients need to be aware of the rise and rise of the megacity and the impact this growth pattern and dynamic has on their hotel spend. Whilst not uniform, the increase in average room rate highlights that travel remains an important part of winning and conducting business. However, the below expectation increase in ARR is not likely to last and we expect to see further ARR growth into the second half of the year, and an interesting 2014 RFP season."

Key market trends noted this year for the Asia Pacific region include:

- Tokyo continues to do well, however that majority of the growth seen locally had been driven by a large shift in the exchange rate with GBP only moving a modest 1.4%. The movement of the pound against the Yen has been favourable to UK based business travellers

- Singapore saw a 4% growth in GBP but this was wiped out by exchange rate movements and so locally the city remains flat in terms of ARR.

- India is showing signs of ARR picking up, although in many cases this was helped by the favourable exchange rate. However real growth was seen in Mumbai and Bangalore driven by a lack of new openings in Bangalore, and lots of new demand from the outsourced IT sector and in Mumbai by growth in the SME sector using best available rates. Indian inflation is also running at approximately 7% per annum with hotels regularly seeing 3-5% increases in negotiated rates (Indian CPI).

- India is seeing a return to growth, especially in those cities which are also seeing growth in the outsourced IT sector and SME business.

And globally:

- Europe as a whole sees a slight drop in ARR of £3.34 this was driven mainly by the weaker performance in the UK regions excluding London and some individual key cities such as Athens and Dusseldorf.

- MEWA continues to be effected by the political and socio-economic instability together with the civil war in Syria however growth in the Gulf pushes a slight regional wide ARR growth from £134.16 to £137.52.

- Asia sees modest growth overall which hides some large swings each way in key cities showing ARR moving from £165.24 to £166.89.

- The Americas, as previously mentioned, see good ARR growth driven primarily by the corporate market continuing to strengthen in the USA and some key Latin cities the ARR moves from £138.40 to £148.65.

- Africa sees a slight fall in ARR but key cities such as Lagos continue to do well, overall the ARR moved backwards from £136.65 to £133.39.