18 Sep 2014
September 18, 2014

2Q14 Asia Pacific Executive Summary

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SUMMER
2014
ASIA PACIFIC
Lodging Real Estate Trends – Executive Summary

The Asia Pacific Pipeline Is Dominated By China.

At Q2 2014 the Total Construction Pipeline stood at 3,674 Projects/ 757,207 Rooms. A very high seventy-eight percent of the Pipeline, 2,791 Projects/ 567,409 Rooms, is presently Under Construction. There are just 369 Projects/ 81,901 Rooms Scheduled to Start in the Next 12 Months and 514 Projects/ 107,897 Rooms in Early Planning.

China has the largest Pipeline in the world by guest room count. With 2,409 Projects/ 521,452 Rooms it also has nearly two thirds of all Construction Projects in Asia. China is trailed at a distance by India with 370 Projects/ 54,815 Rooms and Indonesia with 338 Projects/ 52,495 Rooms. Respectively, they are ranked fourth and fifth globally by the number of Projects in their Pipelines.

Seventy-eight percent of the region’s Pipeline is currently Under Construction, which is telling. RevPAR and ADR are in a three-year slump from the cyclical high of 2011, while Occupancy has been declining since 2012. An economic slowdown is well underway, albeit from high peaks. There is an apparent rush to finish projects prior to additional declines and any further tightening of credit.

China Searches For Balance Between Growth and Banking Reform
The economic slowdown in China is of global importance. The Government continues to search for just the right mixture of targeted fiscal and monetary policy trade-offs to ensure an acceptable level of economic growth, while also implementing necessary banking and credit reforms.

Economic growth rates are now at a six-year low with mounting decreases experienced throughout the summer. Importantly, foreign investment is at a four-year low. Property markets, which account for 25% of capital investment and 13% of GDP, are in a slump as vacancy rates climb. Declines in real estate development have created a drag on industrial production: heavy equipment, cement, furniture, building materials, etc. and have had a broad adverse impact throughout the economy.

The Central Bank has resisted lowering broad-based interest rates for fear of igniting another lending boom, but instead is considering infusing 500 billion yuan into the system specifically to target new lending for public housing projects and small private businesses.

To bolster their balance sheets, the nation’s five largest government directed banks are raising debt and equity as non-performing loans, probably higher than reported, are at six-year highs. The Central Bank has also lowered its reserve requirements to help reduce the strain on banks.

In order to get out from under the mountain of debt that was created to recover from the 2008 recession, today’s policies are specifically geared to prevent another explosion of debt by accepting a slower rate of growth. Finding a balance between growth and reform is a challenge and will likely dampen Pipeline growth over the next few years.

Top Markets In The Asia Pacific Region
Of the top 20 markets in Asia Pacific, 16 of them are in China. Guangzhou leads by Projects with 97, followed by Shanghai and Hong Kong, both with 94, and Beijing with 91.

India has the second largest Pipeline with 370 Projects/ 54,815 Rooms, accounting for 10% of the region’s Construction Projects. The three largest markets are Mumbai with 32 Projects, Bangalore with 19 and Chennai with 16. Indonesia has the third largest Pipeline, 338 Projects/ 52,495 Rooms. Jakarta, the country’s capital, is the largest market in the Asia Pacific region by Projects with 108 Projects/ 18,319 Rooms. The second largest Indonesian market is Bali with 40 Projects/ 6,748 Rooms.

Leading Franchise Companies
InterContinental Hotels Group leads the Asia Pacific Pipeline with 221 Projects/ 52,613 Rooms. The company is focused on Crowne Plaza and Holiday Inn, each with 56 Projects. Marriott International has the second largest Pipeline with 197 Projects/ 53,758 Rooms. Nearly its entire portfolio consists of Luxury and Upper Upscale Projects. Its Marriott Hotel brand leads with 59 Projects. Starwood Hotels & Resorts follows with 192 Projects/ 53,045 Rooms. Its leading brand is Sheraton Hotels with 57 Projects. Hilton Worldwide, leading with its Upscale Hilton Hotels & Resorts and Upper Midscale Doubletree Hotels brands, has 190 Projects/ 56,462 Rooms. Total guest rooms Under Construction for each of these four global companies are very close to one another.

Accor follows with 166 Projects/ 42,415 Rooms spread across all chain scales. Their Upper Upscale Pullman Hotel has the most Projects with 32.

Order the complete Asia Pacific Construction Pipeline Trend Report or a Market Trend Report for any individual market.

LE’s Construction Pipeline Trend Report for Asia Pacific presents an unmatched review of lodging real estate and development activity. Ideal for monitoring development growth trends, the report contains current and comprehensive views of the Construction Pipeline by Project Stage (Early Planning, Scheduled to Start in the Next 12 Months and Under Construction), LE’s Proprietary Three-Year Forecast for New Hotel Openings, current counts for Open & Operating Hotels (Census) and New Hotel Openings for the previous two years.

An LE Market Trend Report for any Individual Market will supply you with every lodging real estate fact needed about a particular market. Reports provide a summary of the Construction Pipeline as well as contain individual Hotel Records with full details on New Construction Projects, Brand Conversions, Announced Renovations, and Open & Operating Hotels (Census) complete with decision-maker contact information.

To order LE’s Construction Pipeline Trend Reports for Asia Pacific, or an individual Market Trend Report for a particular market, updated quarterly, please call +1 603-431- 8740, ext. 25, fill out the following inquiry form or email info@lodgingeconometrics.com for more information.

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