AP Hospitality Bulletin Asia Pacific - March 2024

New Article Series

In our latest series of article, Six pitfalls for full-service hotel development, we dive into the challenges of full-service hotel development in Asia Pacific. In the first part of the article, we discuss the cost of land and impact of seasonality. The second and third part of the article discuss the other four pitfalls, and the fourth part will outline strategies and band aids to address the six pitfalls. The first part is available here, and the following pieces would be published on the next three Fridays. Stay tuned!

Deal that Matters

Hilton acquires Graduate Hotels, which has more than 30 hotels near universities in the U.S. and U.K., for USD 210 million from US-based AJ Capital Partners. When the brand just launched in 2014, Gaw Capital is one of the funding partners for Graduate's initial 500 million development plan across college town in the U.S.. For future development, Hilton said that it sees the addressable market for Graduate Hotel is 400-500 hotels globally. As Hilton prefers an asset-light model, AJ Capital Partners would retain its ownership of the properties after the deal is completed. The acquisition is rare for Hilton, which had the last acquisition of Promus Hotel Corporation with the DoubleTree, Red Lion, Embassy Suites, Hampton Inn, and Homewood Suitesbrands back in 1999.

Transactions that Matter.

‍1. Fairfield by Marriott Osaka Namba, Japan

• The Tokyo-based Mori Trust acquired the 300-key Fairfield by Marriott Osaka Namba from PAG for an undisclosed sum in view of the tourism boom in Osaka. Strategically located in the Namba area, the property is a 10-minute walk from three major train stations as well as shopping streets. Additionally, it is a 20-minute drive from Yumeishima, where Osaka Expo 2025 will be hosted and the first casino resort in Japan is scheduled yo open in 2030. Accessibility to the property will be further enhanced when the underground Naniwasuji Line commences operation in 2031.
• After the Osaka government approved the plans for the casino in April 2023, MGM Osaka is set to start construction in 2025 and commence operations in 2030. MGM partnered up with Orix Corporation to bring the first integrated resorts to Japan, and the initial investment will rise to about 1.27 trillion yen ($8.64 billion), up about 190 billion yen from the initial estimate due to surging construction costs.

2. Shilla Stay Mapo, South Korea

• Located in Mapo, Seoul, the 382-key Shilla Stay Mapo changed hands for 140 billion Won (USD 105 million), or USD 275,000 per key. Kiwoom Asset Management plans to take over the remaining lease agreement for the property with the existing operator, Hotel Shilla, from Hana Alternative Investment, which acquired the property when it was under construction for around 120 billion won in 2013.
• Strategically located with a short walk to Gongdeok subway station, the property offers four room types starting at 21.7 m², one all-day dining restaurant, a fitness centre, and meeting facilities. According to local market intelligence, the property recorded an occupancy rate of around 90% at an average daily room rate of 150,000 Won last year.

3. Four Points by Sheraton Melbourne Docklands, Australia

• Australian fund manager MA Financials acquired the 273-key Four Points by Sheraton hotel in Melbourne’s Docklands for AUD 96 million (USD 63 million) or AUD 351,650 (USD 232,000) per key from Singaporean group Hiap Hoe. Opened in 2017 as part of the Marina Towers development on Docklands Drive, the property features guestrooms overlooking Melbourne Harbour, one poolside food and beverage outlet, a fitness center, and meeting facilities.
• After the acquisition, the property would be rebranded as a Vibe Hotel operated by TFE Hotels, which is a joint venture between Toga Hotels and Singapore’s Far East Group. With over 12 existing Vibe Hotels across CBDs in Australia, TFE Hotels currently operates over 45 hotels in the country. It is expected to see the occupancy rate stabilize at around 80% over the next few years, amidst the strong recovery of Melbourne’s hotel market.

Deal Watch

• Located at Coloane Village in Macau, the 199-key 13 Hotel, valued at HKD 2.4 billion, or HKD 12 million per key, is for sale. The property features luxurious rooms ranging from 167m² to 465 m² together with three 930 m² villas. Opened in 2018, the property is situated a 10-minute drive away from the airport; however, it does not have a gaming component attached.

News that Matters

Cambodia

• Cambodia is optimistic that the recovery of tourism will reach pre-pandemic levels by 2025, as the number of foreign visitors reached 5.4 million in 2023 and more international flights resumed. According to the latest data in 2024, the top three feeder markets were Thailand, Vietnam, and China, which are all easily connected via land borders, and Angkor Wat ranked the most popular attractions among inbound travelers.
• The Ministry of Tourism reported that inbound tourism generated more than $3 billion in revenue with an average length of stay of 7 days in 2023. With the new airport at Siem Reap opening in late 2023 and Techo Takhmao International Airport at Phnom Penh set to open in 2025, the government is optimistic about the future growth of inbound travelers. However, the recovery of Chinese tourists remained modest due to the sluggish economy as well as fears of human trafficking in Southeast Asian countries.

Hong Kong SAR

• Hong Kong welcomed 3.8 million travelers in January, approximately 56% of the levels of 2019. The Hong Kong Tourism Board expected that the number of annual visitors in 2024 would have a 30% increase from last year, aiming for 45–46 million. After fully reopening the border with mainland China, the recovery of tourism and retail remained slow compared to Macau and other destinations in Asia Pacific.
• To boost the recovery of the tourism industry, the government plans to allocate more than HKD 1 billion from the annual budget 2024–25 to fund related marketing and promotional events, including monthly fireworks. The ongoing development of Kai Tak Sport Park is expected to boost Hong Kong’s tourism with its major venues, including a main stadium with a maximum capacity of 50,000 people and an indoor sports centre with a maximum capacity of 10,000 people.

South Korea

• South Korea received about 11 million international tourists in 2023, approximately 63% of pre-pandemic levels in 2019. Short-haul markets remained the key markets, namely China and Japan, but visitors from China only showed a 33% recovery due to the late reopening of its borders. On the other hand, long-haul markets, particularly visitors from Europe and the U.S., showed a strong recovery to approximately 90% of pre-pandemic levels.
• To boost the number of tourists, South Korea would extend its visa fee waiver policy for group travelers from China, Indonesia, the Philippines, and Vietnam to the end of 2024. Additionally, South Korea might be the next hot spot for digital nomads in Asia, as its newest visa allows travelers to stay up to two years in the country. To qualify for the program, applicants must be employed by a foreign company and have worked in the same industry for at least one year with an annual salary of 84.96 million won (USD 63,900) as well as health insurance coverage of at least 100 million won (USD 75,170).

Tourism Recovery

In January, Vietnam and Japan reported that the numbers of monthly visitor arrivals reached pre-pandemic levels. Most regions and countries in Asia Pacific recorded recovery of 75% to 90%, however, Hong Kong is left behind at only 56.4% recovery.