AP Hospitality Bulletin Asia Pacific - December 2024

Deal that matters.

Mandarin Oriental now has full ownership ofthe Exclusive Homes portfolio featuring 25 hand-picked luxurious private villas and mansions around the world, including Phuket and Bali. The collection is now rebranded as Mandarin Oriental Exceptional Homes and Mandarin Oriental plans to grow the collection of luxury private homes at luxury leisure destinations, including hotspots across the Mediterranean, the Alps, and North America. The collection of luxury homes will not only become a great addition to the brand but also expand the brand's presence in new locations.

Transactions that matter.

1. Japan Hotel Portfolio and Tokyo Garden Terrace Kioicho

• New York-based asset manager, Blackstone, added three hotels to itsJapan portfolio, including the 97-key Ritz-Carlton Okinawa, the 162-key Kise Beach Palace, and the 302-key Nest Hotel Osaka Shinsaibashi. While the sale price is undisclosed, the pair of hotels in Okinawa was reported to be sold for approximately 20 billion yen ($130 million) by Okinawa-based owner Kanehide Holdings Company. Located in the Kise Country Club, the Ritz-Carlton is surrounded by 18-hole golf courses and renovated after taking over by the operator in 2012. The 3-star Kise Beach Palace, on the other hand, sits along Kise Beach, featuring two F&B outlets and various water sports. Despite the older age of the property, it presents opportunities to bring in international operators to boost the rate amid the tourism boom in Okinawa.
• Aside from the above hotel deals, Blackstone announced its acquisitionof Tokyo Garden Terrace Kioicho, a mixed-use complex with office space, residential units, and a 250-key hotel, The Prince Gallery Tokyo Kioicho, from Seibu Holding for 400 billion yen ($2.6 billion), representing a 186.5% premium to the asset’s book value of JPY139.6 billion. After the sale, Seibu will remain the asset manager, including the hotel management business.

2. Pavilion REIT Acquisition, Malaysia

• Pavilion REIT announced its plan to acquire a pair of hotels in KualaLumpur, including the 55-key Banyan Tree Kuala Lumpur and 325-key Pavilion Hotel Kuala Lumpur, for a total of RM480 million ($108 million). Theacquisitions are considered related-party transactions, indicating $572,700 per key for Banyan Tree from Lumayan Indah Sdn Bhd and $235,400 per key for Pavilion Hotel KL from Harmoni Perkasa Sdn Bhd. Both of the sellers are indirectly wholly owned by Pavilion REIT major unitholder Tan Sri Lim Siew Choon, chairman of Pavilion REIT’s manager.
• The acquisition will further enhance Pavillion REIT’s portfolio with hospitality assets, leveraging the synergies with Pavillion Mall. Both hotels will be leased to Harmoni Perkasa under a 10-year agreement, generating fixed rental income starting at RM33.5 million per year, with an estimated grossyield of 7.0%.

Deal Update

• China Jinmao divested the 492-key Hilton Sanya for RMB1.85 billion ($253 million,or $515,000 per key) to Hainan Lichi Consulting Co., Ltd, a newly established company without much information. The sale price is 15% above its book value of RMB1.6 billion as of August 31, 2024.

News that matters.

Indonesia

• Indonesia welcomed approximately 1.2 million visitors in October 2024, reaching 89% of the levels in 2019. The year-to-date visitor arrivals recorded 11.5 million, an 82% completion rate towards the annual target of 14 million. Bali’s Ngurah Rai Airport is the most popular point of entry, accounting for 46% of total visitors, followed by Jakarta’s Soekarno-Hatta Airport (18%). Asof October 2024, the year-to-date visitor arrivals to Bali surpassed its performance in 2019, amid challenges of overtourism.
• The newly installed Tourism Ministry announced its 5-year plan to enhance Indonesia’s tourism offerings, especially the five priority destinations, including Lake Toba in North Sumatra, Borobudur Temple in Central Java, Mandalike on Lombok, Labuan Bajo on the Island of Flores, and Likupang in North Sulawesi. The Ministry also plans to secure “quality international tourists” through overseas promotional activities. To avoid overcrowding in Bali, the 3B tourism package has also been launched to promote diverse attractions in less busy areas of Banyuwangi, West Bali, and North Bali. At the same time, the government plans to ban new construction of hotels in Bali for the next few years, hoping to curb over development on the island.

Philippines

• With an annual target of 7.7 million foreign visitors, a total of 5.35 million foreign visitors to the Philippines was recorded from January through November 2024. South Korea was the largest feeder market, accounting for 26.8%, followed by the USA with 15.7% and Japan with 6.6%. The weak performance of the Chinese economy together with the geopolitical tensions softened demand from China, resulting in fewer travellers than expected.
• It is unlikely that the official annual visitor goal will be achieved, but the country constantly works on diversified strategies, amid the soft demand from China. Cebu Pacific introduced new routes between Manila and Chiang Mai but reduced flights to China. At the same time, the Department of Tourism recently announced the VAT refund for single transactions over P3,000 ($51) for foreign tourists, increasing the attractiveness for shoppers.

South Korea

• With over 1.6 million foreign visitors in October 2024, South Korea sees a strong recovery of inbound tourism, close to its performance in 2019. The government further extends K-ETA (electronic travel authorization) to citizens from 67 eligible countries, including its key feeder markets, Hong Kong, Japan,and Taiwan, until the end of 2025. Once the largest feeder market, Chinese travellers are still required to obtain a visa prior to their arrival, despite the visa-free policy for Korean travellers to China.
• While inbound tourism in Korea is booming, the travel deficit remains, as Koreans’ spending on overseas trips grows. As of October 2024, spending by outbound travellers reached $22.3 billion, while inbound tourism revenue only recorded about $13.8 billion. The number of outbound Korean travellers was also close to the levels in 2019, recording 23.6 million outbound travellers as of October 2024.