Asia has long been one of the most fascinating and exciting destinations—beyond anything I could have dreamt of. Regardless of the purpose of my trip—be it for leisure or business—the balance between cultural authenticity and genuine hospitality in Asia is always right.
It’s unsurprising that in difficult times such as these, one of the very few places in the world where economic growth, and in particular, hotel performance growth can be observed and maintained is in Asia. I wanted to take a closer look at a region that has seen it all, from booming mass tourism and spectacular economic growth to economic challenges and natural catastrophes. Probably no other region has managed to reinvent itself and reposition its best attributes to attract tourism and business.
I believe there is growth on the horizon for the hotel industry in the region. Whilst the rest of the world is pondering the outcome of the current economic crisis, Southeast Asia managed to build strong economic fundamentals in its major cities.
Every major market in the region saw an increase of 5% or more in gross domestic product during 2010 and 2011, except for Thailand, which is still recovering from last year’s tsunami.
What follows is a breakdown of key countries in the region:
Thailand
The tsunami tragedy of 2004 devastated some of the most pristine beaches in the country and consequently affected its tourism industry. Thai hoteliers have since been battling between political protests and the global economic crisis. Even more recently, the flooding in Bangkok impacted what was on pace to be a positive year for the hotel industry.
A great challenge for Thai-based hotels is how to rapidly recover business trading between each natural disaster. This can be observed if we look at the supply growth rate in Thailand, where a steady growth rate of 4% has held since 2009. Considering that Thailand’s overall economy grew at a rate of 3.9% last year, one should not hold many concerns.
However, the current occupancy level has remained below 65% since 2008.
The good news is that average daily rate in local currency grew by 1.3% in 2011 or 4.6% in U.S. dollars to $97.
Singapore
I wrote not long ago about the F1 Grand Prix in Singapore, which is a major source of global attention for this small city-state. I believe this type of event places Singapore in the minds of potential visitors, in particular when a company or person is looking to organize events or even partake in a brief stopover. Singapore has held its economic position strongly, primarily led by domestic demand that has supported the country’s growth. GDP in Singapore rose by 14.5% in 2010 and 5.1% in 2011.
I am not surprised that this economic trend can easily be translated with Singapore hotel occupancy, where absolute levels are the highest in the region (84.1% in 2011) and ADR increased 12.1% in local currency (+21.2% in U.S. dollars to $228). One of the drivers for such growth can be attributed to the limited supply between 2006 and 2008 before the economic downturn, which did not severely affect rates and occupancy in Singapore. The city had to wait until 2010, where two major projects came into the pipeline and added 5,000 daily rooms to the city’s inventory. It resulted in a net increase of new supply in the last two years of 14.6%.
Malaysia
My last visit to Malaysia was a not too long ago, but I must admit that my experience crossing the country from Singapore on my way to Thailand left me positively shocked regarding the economic potential of the country. Despite the global economic crisis, hotels in Malaysia and in particular Kuala Lumpur are seemingly immune to any possible downturn. Occupancy has remained close to 70% in Kuala Lumpur where ADRs have increased by 4.8% to $113.
The role of Kuala Lumpur as an intra-regional trade center might explain its economic resilience, strongly supported by its exports in rubber and palm oil. Between 2009 and 2010, Malaysia’s GDP increased by a more-than-comfortable 14.5%.
Indonesia
At the very end of the Southeast region of Indonesia, the capital of Jakarta saw its highest occupancy level since 2005, reaching 71.7% during 2011. Hotel performance was fueled by a steady, tiger-like economy, in which GDP growth climbed 6.1% and 6.2% in 2010 and 2011, respectively. In addition, Indonesia’s proximity with Australia has allowed it to enjoy positive economic growth during the economic downturn, most notably in the leisure and tourism industry.
Jakarta is a hub for visitors both internationally and domestically, as well as a booming center of commerce. Occupancy levels in the city increased from 56.7% in 2005 to 71.7% in 2011, while ADR increased by 13.7% in local currency (+17.5% in U.S. dollars, to $90).
I believe strongly in the Southeast Asia’s ability to sustain future growth. First and foremost, regardless of the country, the region is strategically located between Europe, the Middle East, China and Australia, making it almost impossible for travelers not to stopover. The region also remains very attractive for travelers to either conduct business or for those looking to pamper themselves and enjoy some of the world’s most luxurious retreats.
The new and seemingly never-ending source of visitors from emerging markets such as China, India and countries in the Middle East, has allowed the region to sustain its tremendous and exciting growth rates, and I believe this can continue into the future. During the economic downturn, those visitors from newer markets since replaced those in Western countries who would have otherwise occupied the rooms. With the recovery of the global economy, it seems that the economic trend for hotels in the region can only improve, and we can look positively at the future for the hotel industry from Thailand to Indonesia.
David can be contacted on dgrossniklaus@str.com.
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