The global hotel business is in a deep funk, but that has not kept the industry from betting on the one region of the world where growth is strongest –Asia .hardly a week goes by in the region without a hotel’s grand opening or announcement of expansion plans, despite a sharp downturn plans. Despite a sharp downturn in the world’s major economies that has caused a plunge in occupancy and room rates across Asia, the United States and Europe.
In October, two major upscale hotels opened in Hong Kong, each with views of the -skyscrapers huddled between the city’s mountains and harbour.One is a 381-room Hyatt Regency on top of a shopping mall in the Kowloon district of the city. The other is the 117-room Upper House, owned by the Hong Kong conglomerate Swire and within walking distance of the central business district of the central business district on Hong Kong Island. A ‘300-room Ritz-Carlton is among the hotels due to open here next year.
Many of these projects got under way before the economic slowdown hit the travel industry, but even in the midst of the gloom, hotel companies are pressing ahead with major expansion plans in Asia.
“We’re growing more rapidly here than in any other region of the world,’ said Michael Isenberg, who heads Accor’s Asia-Pacific business. The French hotel giant, which runs the Novotel, Mercure and Sofitel brands, is opening 54 hotels, with about 10,000 rooms, in Asia this year and about as many again in 2010 .In India alone, Accor plans to have 50 hotels, with more than 10,000 rooms, by 2012, up from five hotels now.” The growth opportunities in Asia-Pacific are unsurpassed perhaps anywhere in the world ,” said Frits van Paasschen , chief executive of Star wood, whose up market brands include Sheraton and Le Meridian and which just opened its 150th hotel in the region.
Smaller local hotel operators are also joining the rush.Amari, a Thai hotel management company with 11 properties and 3,000 rooms, announced pans last month to add another 40 hotels by 2018. Also last month, Park Hotel Group, which is based in Singapore and runs eight large hotels, announced that it planned to open as many as 12 in the next three to five years.
Not all projects have gone as planned, and not all has been rosy.
In Beijing, a 34-story building under construction and designed by the Dutch architect Rem Koolhaas went up in flames in February after an illegal firework show started a fire. The building was to be completed in May and house a Mandarin Oriental hotel.
The Beijing Marriott, which opened just before the 2008 Olympics and was booked solid, saw its occupancy rate fall to about 20 per cent earlier this year, according to a report in China Daily, a state-run newspaper .Marriot would not comment on individual hotel statistics.
A number of new hotels opened in Beijing and Shanghai for the Olympics last year and the 2010 World Expo set for next year, adding a lot of supply at a time of low demand.
Revenue per available rooms, a key measure of hotel performance, plunged 56 per cent in Beijing in the first eight months of this year, according to a recent report by the Deloite consulting firm. In Shanghai, the figure was down 35 per cent as many hotels stand half empty.
For the entire Asia-Pacific region, revenue is down 28.4 per cent, echoing the situation in Europe, as businesses and tourists cut back on overnight stays and events, forcing operators to offer deep discounts.
Although some hotel companies say occupancy rates have started picking up, room rates remain under intense pressure. And many economists believe the global economy is not out of the woods yet, given that US consumer spending – the driving force for much of Asia’s growth – will take years to return to normal.
“Europe and the US are still in a total mess, and Asia is not immune to what’s going on there,” said Albert Edwards, head of global strategy at Societe Generale, at a media briefing in Hong Kong on Tuesday. Still, hotel managers stand by their belief that Asia is the place to be.
“Look at the statistics: At present, the US has 4.9 million hotel rooms catering to a population of 300 million. Europe has about 5.3 million rooms. China, with its population of 1.3 million, has only 1.7 million, and India barely has 120,000.There’s a lot of runway left in these countries,” said Paul Foskey, who is based in Hong Kong and heads Marriott International’s Asia business. Marriott has 72 hotels, with 19,000 rooms, in its Asia pipeline, adding to the 113 hotels it operates in the region now.
Ian Wilson, general manager for Asia at Fairmount Hotels & Resorts, another international hotel company, said that in 10 years. China is expected to have a middle class of 400 million.” That, and a growth rate of 6 per cent plus this year – if you got that in the West, everyone would be highfiving each other,” he said.
Of course, within Asia the situation varies widely from country to country – and even from city to city, Japan, with its huge economy and affluent population, is very important for hotel operators. But it is a tough and mature far less growth in coming years than the rest of Asia, economists say.
India, with its large population, has enormous potential, but infrastructure there remains poor, and industry executives complain about the dozens of permits and time needed to set up a hotel. Political and security issues have further dented the already weak business in Thailand and India. Indonesia, by construct, is a bright spot because expanding low-fare air travel makes the island of Bali easier to reach.
Within China, too, the picture is varied.” China is not a country China is a continent,” said Martin Rinch, Asia –Pacific chief at Hilton Worldwide, said by telephone from Singapore. While hotels in China’s main international gateways – Shanghai, Beijing and Hong Kong - are under pressure , business in the secondary and territory cities in the country’s vast interior has mostly stayed resilient, as those areas depend less on international travel, and are more exposed to domestic Chinese travelers.
“Domestic destinations are doing very well,” Rinck said. “Cities like Hefei and the resort of Sanya – here, it’s more than 80 percent Chinese clients, and they have not stopped coming .Demand here is still increasing .”
Add to that China’s solid infrastructure.”China is building tens of thousands of kilometers of highways and railway track, and 97 new airports. This is the place to be,” said Richard Solomon’s, finance chief and head of commercial development at Intercontinental Hotels Group.
International hotel operators are also positioning themselves for a huge expected increase in the number of Chinese traveling abroad. “It’s key to have an on-the-grounda presence here,” said Wilson of Fairmont, “to establish oneself as a brand that domestic travelers will come to as and when they travel abroad, which they surely will do so more and more in future.”
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