AP Hospitality Bulletin Asia Pacific - September 2023

Transactions that matter

1. Hotel Stripes Kuala Lumpur, Malaysia

• Malaysia-based YTL Hospitality REIT acquired the 184-key Hotel Stripes Kuala Lumpur for RM 138 million (USD 29 million) or RM 750,000 (USD 157,000) per key from Hotel 25 Sdn Bhd ("Hotel 25"). Built in 2017, the Hotel is part of the Autograph Collection Hotels under Marriott. Situated at the heart of the capital city, there is one restaurant, one bar, an outdoor pool with views of Kuala Lumpur Tower, and a gym. The hotel also has six meeting rooms to suit small meetings.
• Hotel 25, the operator, is an indirect wholly owned entity of YTL Corp Bhd, which is a significant unit holder in the YTL Hospitality REIT. The Hotel will be leased back to Hotel 25 for an initial term of 15 years, with an option to renew for another 15 years. The REIT’s portfolio covers a number of hotels across Malaysia, Japan, and Australia, including The Ritz-Carlton Kuala Lumpur (Suite & Hotel Wing), Hilton Niseko Village, and Marriott Sydney Harbour Circular Quay.

2. Hotel Nikko Himeji, Japan

• ORIX JREIT announced the disposition of its joint ownership of the 257-key Hotel Nikko Himeji in Hyogo Prefecture for 1,832 million yen (USD 12.2 million). It is sold to an undisclosed domestic buyer who is not a related party to the seller or its affiliations. In 2016, ORIX acquired partial ownership of the Hotel wing as well as the parking lot for 4.8 billion yen (USD 47.2 million). The disposition is expected to record a loss of 3,258 million yen for ORIX.
• Since the acquisition in 2016, the hotel market in Himeji has become challenging due to an increase in supply of 25% (between 2015 and 2021) and decreasing demand due to COVID-19. The wedding and banquet business is likely to stay low because of changing behavior after the pandemic. Despite the continuous refurbishment and improvement done by the management company together with the operator, the income did not show signs of improvement. The NOI yield in February 2023 was reported to be 1.3%, although the occupancy rate reached 98.5%.

Deals Watch

• Located at Wong Chuk Hang in Hong Kong, the 162-key Ovolo Southside is for sale at an indicative price of HKD 1.1 billion (USD 141 million) or HKD 6.8 million (USD 870,370) per key. The Hotel is strategically situated next to the MTR station, 2 to 3 stops away from the CBD. This is the second Ovolo hotel for sale after the sale of The Inchcolm by Ovolo in Brisbane.
• According to local news, Jinmao Investments has put its 550-key The Westin Beijing Chaoyang for sale for RMB 2.8 billion (USD 384 million) or RMB 5.1 million (USD 698,180) per key. Opened in 2008, the hotel is situated in the heart of Beijing, with proximity to office buildings, embassies, and malls.

‘Overtourism’ in Asia Pacific

Japan

• With the return of inbound travelers, Japan started to launch initiatives to tackle overtourism in key cities. Kyoto, for example, announced a number of measures in preparation for the autumn, which is typically the peak season during foliage. The ancient capital of Japan is expected to have a full recovery of visitors this fall. While overtourism was not new prior to the pandemic, the situation has worsened since Japan reopened its border. The newly announced measures include an increased number of buses, the suspension of one-day bus pass, and the introduction of temporary luggage storage at the train station. In September, the mayor announced the supplementary budget plan for the fiscal year, including 140 million yen allocated for overtourism.
• At the national level, overtourism also becomes an issue for the Japan Tourism Agency. The influx of inbound tourists not only causes problems for local residents but also discounts the travel experience. Mount Fuji is reported to be overcrowded with both domestic and foreign hikers. In response to overtourism, the government now encourages travelers to visit more remote destinations, hopefully building a more sustainable tourism development in the long term.

Indonesia

• Indonesia’s most sought-after holiday destination, Bali, faces overtourism again after it reopened to international visitors. The island has been seeing too many tourists in the past decade, and the government has started to look for solutions to enhance the quality and sustainability of tourism. To curb the misbehavior of tourists, the government is reported to have several proposals, from banning tourists from driving motorbikes to imposing a cap on arrivals. It is likely that the tourist tax of IDR 150,000 (USD 9.75) per visit will become effective in early 2024.
• Komodo National Park, a UNESCO World Heritage Site, intended to increase the entry fee to tackle overtourism; however, it was cancelled due to protests from tourism operators in the area. In July 2022, the Provincial Government planned to hike the entry fee from IDR 150,000 (USD 9,75) to IDR 3,750,000 (USD 244). The entry fee to Komodo National Park remained unchanged, while the daily limit of visitors remained at 200,000.

Recovery in Key Markets

As some countries worry about the overtourism caused by the influx of tourists, most countries and regions in Asia Pacific see a healthy growth in visitor arrivals in July during the summer holidays. The recovery compared with pre-pandemic figures falls between 55% and 80%, and Taiwan seems to struggle with the absence of mass tourists from mainland China.

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