International Hotel Brand Penetration in APAC - Decisions that matter - Webflow
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July 2022 International Hotel Brand Penetration in APAC Anchi Liu Analyst Dan Voellm, MRICS CEO & Founder Decisions that matter.
International Hotel Brand Penetration in APAC July 2022 Introduction The hotel supply in Asia Pacific grew rapidly over the past decade and operators keep looking for opportunities by fine-tuning their entry strategies, while owners evaluate affiliating their property/-ies with a brand or not. This article analyses the current hotel supply and the penetration rate of internationally branded hotels in Asia Pacific based on HOG data and investigates the situation of hotel supply in top cities in the region. It aims to provide an understanding of the characteristics of the hotel market, and the insights for future hotel projects in the region, including new hotel opening, rebranding, or conversion. Meanwhile, it also gives an overview of the relationship between hotel supply, population, and inbound travellers in the region for a better understanding of the hotel supply for future planning. Overview The 9th edition of the Asia Pacific Hotel Operator Guide (HOG) features 53 operators capturing over 7,800 existing properties in 33 countries and regions in Asia Pacific. HOG presents the landscape of branded hotels, including international and regional chains in the region. While HOG covers a great percentage of branded properties in the hotel market, the situation of total existing supply in each country and region is left unknown. This article investigates the existing hotel supply and analyzes the penetration rate of branded hotels supplemented by data retrieved from online travel agencies (OTAs) and local destination marketing organizations (DMOs) in the region. Considering the unique landscape of OTAs in China, Ctrip is the main source for supply data in mainland China and Booking.com is used for the rest of the countries and regions. Meanwhile, although this article aims to reflect the situation of hotel supply, the data collected might include other property types depending on the OTAs and DMOs policies. Due to the data available, a comparison is only possible by the number of properties, not number of rooms. The reader should bear in mind that some of the un-branded hotels may be smaller in size and not necessarily suitable for a conversion. Operators participating in the 9th edition of HOG include major international chains, such as Hilton Worldwide, Hyatt Corporation, InterContinental Hotels Group, Marriott International, Wyndham Hotels and Resorts; China-based operators, like Empark Hotels & Resorts, Huazhu Group (high- end brands), Minyoun Hospitality, Narada Hotel Group, and Wanda Hotels & Resorts. Many other international and regional operators are also part of the publication; the full list is shown in the appendix below Total Supply by Country According to OTA and DMO data, by 2022 the total hotel supply reached over 300,000 existing properties in Asia Pacific, and mainland China accounted for more than 75% of the total supply, or approximately 236,700 properties. Hotel supply data in this article was derived from three major sources, branded properties covered by the HOG, the data on hotels and lodging facilities 2
International Hotel Brand Penetration in APAC July 2022 from the local DMOs, and hotel supply advertised on OTAs. Based on the data collected, the highest number among three would be used to represent the number hotel properties in the country or region, and it is assumed that the hotels excluded in the data are negligible as they are not comparable to the hotels discussed in this article. For the majority of countries and regions the total supply is based on the number retrieved from the OTAs, which reflects the number of hotels available in the market; however, a few destinations with less supply would rely on the data provided by DMOs. We have assumed that there are no unique properties across the three sources analyzed in this article or for the number to be insignificant. The datasets are thus mutually inclusive. DETAIL 1. NUMBER OF TOTAL HOTEL PROPERTIES BY COUNTRY/ REGION 9,000 236,733 8,000 7,000 Number of properties 15,821 6,000 5,000 4,000 3,000 2,000 1,000 - HOG DMO OTA Source: AP Research 3
International Hotel Brand Penetration in APAC July 2022 DETAIL 2. NUMBER OF TOTAL HOTEL PROPERTIES BY COUNTRY/ REGION (CONT’D) 800 700 Number of properties 600 500 400 300 200 100 - HOG DMO OTA Source: AP Research The total hotel supply in countries having few branded hotels, such as Pakistan, Bangladesh, and Mongolia, relied heavily on the data collected from OTAs. While there is a certain number of branded hotels in major cities, the hotel supply in these countries are mainly independently operated lodging facilities, including many guesthouses and inns. In general, DMOs capture more basic accommodation types than OTAs that have more consistent requirements across markets. Penetration rate of hotel brands by number of properties (according to HOG data) To further understand the penetration rate of branded hotels in each country and region, this article used the data in the HOG to represent the penetration of branded hotels in each country and region, and the figures from the OTAs and DMOs for total hotel supply, including domestic hotel chains and independent hotels. Detail 3 and Detail 4 below present the penetration rate of each market, ranking from the highest to the lowest in Asia Pacific. 4
International Hotel Brand Penetration in APAC July 2022 DETAIL 3. PENETRATION RATE OF BRANDED HOTEL PROPERTIES BY COUNTRY/ REGION 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% HOG DMO OTA Source: AP Research Countries and regions with higher penetration rate would typically have a smaller size in terms of geographic area, or a more developed hotel market. Island countries in the Pacific, tourism destinations such as Fiji, Guam, and French Polynesia have a relatively small amount of hotel supply identified, and the majority of the properties are resorts operated by international brands or independent operators. In all these markets local demand is limited and/or price sensitive and catered to by local, unbranded properties. Well-developed hotel markets like Singapore, Macau SAR, and Hong Kong SAR also have a relatively higher penetration rate between 25% to 45%. Both Singapore and Hong Kong SAR attract a wide array of hotel brands to the city, ranging from luxury to economy brands to capture the diverse demands. Branded hotels and independent hotels aside, there are also several local and budget hotels and inns in the cities many targeting the market of price sensitive travellers. Additionally, several local hotel brands backed by developers and investors also accounted for a small number of existing hotel supply in Singapore and Hong Kong. As the hospitality arm of Hong Kong-based developer, Sino Group, Sino Hotels owns the Fullerton brand, and currently operates 4 white-labelled properties in Hong Kong together with Fullerton branded hotels in Hong Kong, Singapore and Australia. Additionally, Harbour Plaza backed by Cheung Kong Properties manages 9 hotels in Hong Kong and Tang’s Living Group under Stan Group also features 11 hotels in their portfolio in Hong Kong. On top of local operators, theme park 5
International Hotel Brand Penetration in APAC July 2022 operators also operate a small number of hotels, such as Resort World Singapore managing 6 hotels and Hong Kong Disneyland with 3 hotels. On the other hand, the unique proposition of Macau SAR also results in a healthy penetration rate of branded hotels, where several casino operators see benefits to brand some of their hotels with international flags. DETAIL 4. PENETRATION RATE OF BRANDED HOTEL PROPERTIES BY COUNTRY/ REGION (CONT’D) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% HOG DMO OTA Source: AP Research A lower penetration rate of one hotel market suggests that it is possibly affected by a stronger presence of domestic hotel groups or independent operators and more diverse types of accommodation properties. Domestic hotel groups play a crucial role in several markets in the region competing heavily with the international and regional hotel chains covered in the HOG. China, India and Japan are all markets that are dominated by domestic hotel groups and independent operators – many at a lower end of the spectrum – despite the increasing presence of internationally branded hotels in the major cities. The hotel market in mainland China encompasses a diverse group of players from local operators and hotel chains. The leading operator in limited-service hotels, Jing Jiang Hotel Group, recorded more than 9,350 limited-serviced properties together with 23 hotels under Radisson Hotel Group 6
International Hotel Brand Penetration in APAC July 2022 (RHG) in mainland China, and the second largest operator, Huazhu Group reported 7,704 properties in greater China as the end of 2021. While limited-service brands by international operators, such as Super 8 Hotels (Wyndham Hotels & Resorts) and Hampton by Hilton, expand in mainland China through master franchise agreements, the hotel supply outside major cities and attractions is mostly under local brands or independent. On the other hand, India’s penetration rate of branded hotel is merely 2% of the total supply. The number of approved hotels reported by the Ministry of Tourism in 2021 is only 13.5% of the total supply on the OTA, and there is a huge number of independent hotels and lodging facilities across the country, particularly in rural areas. Besides the international chains covered in HOG, Radisson Hotel Group and Choice Hotels both have a portfolios in India; the former has 103 properties and the later has 36. Additionally, India-based hotel groups have a high penetration rate in cities across India. The notable operators in luxury and upscale hotel market include ITC hotels having more than 70 hotels and Taj Hotels having over 85 hotels in India. Similar to the hotel market in mainland China, mid-scale and budget hotels under domestic hotel groups also accounted for a larger share of the existing supply. Lemon Tree Hotels, the leading domestic hotel chains in mid-scale market manages 85 countries in the countries; budget hotels like Treebo, FabHotels and OYO Rooms each have a greater market share than the combined branded HOG hotel supply in India, and they also have a fair market share in neighbouring countries, such as the extensive OYO Rooms portfolio in Pakistan. The types of properties also affect the penetration of branded hotels in the countries and regions. To adapt to the unique geographic locations of Bhutan and Nepal, the available hotel supply in both countries is either resorts or inns. While several international brands have entered these markets, it still left a big supply gap which is catered to by smaller owner-operators. The hotel supply in other developing destinations, such as Sri Lanka and Laos, are still dominated by various lodging facilities, including resorts, lodges, inns, and bungalows, developed and owned by local business and operators. 7
International Hotel Brand Penetration in APAC July 2022 Top 10 City in Asia Pacific DETAIL 5. TOP 10 CITY BY TOTAL SUPPLY 6,000 5,000 4,000 3,000 2,000 1,000 - Chengdu Shanghai Beijing Hangzhou Bangkok Tokyo Jakarta Seoul Singapore Hong Kong HOG OTA Source: AP Research Cities in mainland China lead the ranking of number of properties by city in Asia Pacific - Chengdu, Shanghai, Beijing, and Hangzhou each have existing hotel supply between 3,400 to 5,500 properties. Four capital cities have more than 1,000 properties on average. Rounding out the top 10, Hong Kong SAR and Singapore having roughly 300 hotel properties each. Similar to the overall hotel supply in mainland China, the hotel market in these leading destinations has a great mix of supply by international chains, domestic hotel groups and independent operators. While Chengdu features a total hotel supply at close to 5,500 properties on the OTA topping all other cities, the number of properties in the HOG is only 211, suggesting that the domestic hotel groups and independent operators dominate the hotel market in Chengdu despite the great number of branded hotels. 8
International Hotel Brand Penetration in APAC July 2022 DETAIL 6. PENETRATION RATE OF BRANDED HOTEL PROPERTIES BY CITY 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Singapore Hong Bangkok Jakarta Beijing Shanghai Seoul Tokyo Chengdu Hangzhou Kong HOG OTA Source: AP Research Unsurprisingly, Singapore and Hong Kong have the highest penetration rate of branded hotels among the 10 cities at 37% and 30%, respectively, whereby penetration rates in other cities ranges from 3% to 12% often dominated by domestic hotel groups and independent owners. For example, Japan-based hotel groups have a strong portfolio in Tokyo; full-service hotel providers such as APA Hotels & Resorts and Mitsui Garden have 58 and 17 properties, respectively, in Tokyo. Economy hotels like Tokyo Inn, Sotetsu Fresa Inn and Dormy Inn also have a fair market share in the city. Regional chains and boutique operators also have a strong portfolio in cities in Southeast Asia; Compass Hospitality and UHG Hospitality have a greater market share than any other brands in Bangkok, and RedDoorz and OYO Rooms have a combined number of over 200 properties in Jakarta as suggested by OTAs. Overall, the top 10 cities present a higher penetration rate of branded hotels than the whole country despite the strong presence of domestic hotel groups; and it also implies that branded hotels might have the potential to enter other key cities to push up the penetration rate in the future. 9
International Hotel Brand Penetration in APAC July 2022 Pipeline Supply DETAIL 7. PIPELINE HOTEL SUPPLY, 2022-2026 1,400 1,200 1,000 800 600 400 200 - 2022 2023 2024 2025 2026 Mainland China Thailand India Vietnam Indonesia Others Mainland China unbranded (LE) APAC ex-China unbranded (LE) Source: AP Research; Lodging Econometrics (“LE") Note: The number of pipeline data excludes projects with undefined opening dates. The penetration rate of branded hotels in Asia Pacific suggests the potential of the future development for branded hotels. Asia Pacific is still one of the fastest growing regions in terms of new hotel supply in the world. Lodging Econometrics (“LE”) forecasted to have 1,119 hotels opening in 2022, whereby at least 64% or 717 hotels are confirmed to be branded. For 2023, LE anticipates 1,244 hotel openings, and at least 61% of which, or 762 hotels, are announced to be branded. Mainland China ranks first with over 1,600 branded hotels in the pipeline over the coming five years. It is also observed that countries and regions with lower penetration rates are expecting a higher number of branded hotels in the pipeline, such as Indonesia, Thailand, Vietnam, and India with over 30 properties in 2022 and 2023. The rapid development of mid-scale and economy brands through franchise and master agreements is expected to sustain the growth of branded hotels in China; at the same time, hotel groups are entering top-tier cities with brands from luxury, upscale, and lifestyle brands. 10
International Hotel Brand Penetration in APAC July 2022 Mainland China aside, other countries tend to have a more even distribution in terms of pipeline supply by brands. At the same time, hotel groups also have an eye on other developed markets with new brands and diverse property types. For example, there would be at least 17 hotels opening in Singapore and 6 in Hong Kong SAR by 2025, despite the existing competitive hotel market. These new projects including the debut of brands in the city, and launch of different property types, like extended stay. It is noteworthy that Hong Kong would welcome the first Tribe branded hotel (by Hilton) outside the US market, and Singapore also has the first voco property (by IHG) in Southeast Asia earlier this year. At the same time, luxury and upscale brands plan to enter the markets with strong foundation in the region, including the Edition and Standard Hotels in Singapore, and Kimpton and Andaz in Hong Kong. Hotel Supply, Population, and Inbound Travellers To further analyze the situation of hotel supply in Asia Pacific, we also present the ratio of total hotel supply over the population and inbound travellers in each country and region. The two sets of figures suggest the characteristics of the markets, ranging from being highly dependent on inbound travellers to heavy reliance on the domestic market. The total population in the countries and regions covered in the article has reached 4.2 billion in 2022, and total inbound travellers recorded more than 348 million in 2019. As there are a few countries that have a large population, the average number of hotels per 1,000 residents is 0.07 and the median is 0.05. On the other hand, there are approximately 0.86 hotels per 1,000 inbound travellers in Asia Pacific and the median is 0.19. While the number of hotel supply reflects the situation in 2022 in this article, the number of inbound visitors in 2019 was adapted for more accurate analysis despite the growth of the number of hotels in the past two years and to negate the effect of the pandemic. Detail 8 and Detail 9 present the figures of each country and region, and the size of the bubble reflects the total number of hotel supply. 11
International Hotel Brand Penetration in APAC July 2022 DETAIL 8. HOTEL SUPPLY PER 1,000 RESIDENTS AND INBOUND TRAVELLERS BY COUNTRY/ REGION 4 3.5 Mainland China 3 Hotel per 1,000 Inbound Travellers 2.5 2 1.5 Bhutan 1 Laos Maldives 0.5 0 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 Hotel per 1,000 Population Source: AP Research DETAIL 9. HOTEL SUPPLY PER 1,000 RESIDENTS AND INBOUND TRAVELLERS BY COUNTRY/ REGION 1.2 Nepal 1 India Sri Lanka Hotel per 1,000 Inbound Travellers 0.8 0.6 Bangladesh Indonesia 0.4 Vietnam Taiwan Philippines Japan Australia 0.2 Cambodia Malaysia South Korea Thailand Hong Kong SAR New Zealand French Polynesia Singapore Macau SAR 0 Guam 0.00 0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16 0.18 0.20 Hotel per 1,000 Population Source: AP Research 12
International Hotel Brand Penetration in APAC July 2022 While most of the countries and regions share similar ratios of hotel supply over the population and inbound travellers, mainland China and Maldives show significant differences from the rest of the sample. Mainland China topped the ratio of hotel supply over inbound travellers at 3.6 hotels per 1,000 inbound travellers; and it also recorded 0.16 hotels per 1,000 residents. The ratios reflect how hotel supply in mainland China is mainly catering to the domestic market considering its large population and geographical size. They also resonate with the earlier discussion of hotel types as the diverse hotel market with strong domestic players in the limited- service hotel space catering to domestic travellers. On the other hand, the Maldives has the highest number of hotels per 1,000 residents at 1.5, and it is also the only market in the region that recorded a ratio above 1. The ratios reflect how hotels, resorts and guesthouses in the Maldives mainly target inbound travellers. Meanwhile, the Maldives received approximately 1.7 million inbound travellers in 2019, which is more than two times its population. Most of the countries and regions share similar figures ranging from 0.001 to 0.2 hotels per 1,000 residents and 0.004 to 0.6 hotels per 1,000 inbound travellers. Countries and regions outside this range usually have a hotel market that focus on either inbound travellers or domestic population. Hotel markets having a higher ratio over inbound travellers, including India and Bangladesh, are typically driven by the domestic market with a small share of supply catering to inbound travellers. However, Laos, Bhutan, Nepal, and Sri Lanka are outliners due to the supply structure in the hotel market, such as hotel types and sizes. These markets record a greater number of small- sized hotels and accommodations. According to the number released by the DMOs, only 10% of the hotel supply is considered “classified tourist hotels” or “starred hotels” in these countries, and the rest falls into the category of guesthouses, bungalow, and boutique hotels. At the same time, inbound travellers dominate the markets here. Likewise, island countries including Guam, CNMI, and New Caledonia exhibit a higher hotel to local population ratio, similar to the Maldives, mainly relying on inbound travellers. These markets usually have a small number of hotels due to geographical size, and the hotels registered with DMOs and OTAs are mostly medium to large-scaled hotels and resorts targeting inbound travellers. 13
International Hotel Brand Penetration in APAC July 2022 DETAIL 10. HOTEL SUPPLY PER 1,000 RESIDENTS AND INBOUND TRAVELLERS BY TOP CITY 3.50 3.00 Hangzhou Hotel per 1,000 Inbound Travellers 2.50 2.00 1.50 Chengdu Beijing 1.00 Hong Kong Jakarta Tokyo 0.50 Shanghai Singapore Seoul 0.00 - 0.05 0.10 0.15 0.20 0.25 0.30 0.35 Hotel per 1,000 Population Source: AP Research In the top 10 cities in Asia Pacific, there is a difference between mainland China and markets in the rest of Asia. Cities outside mainland China record a hotel to local population ratio ranging from 0.03 to 0.11, and 0.01 to 0.24 hotel to inbound travellers. Unlike the figures at country/ region level, the ratios of each city are less scattered. These top cities are usually populated and attractive to inbound travellers, hence, the hotel supply tends to cater to both foreign and domestic travellers. In the rest of Asia, markets that cater heavily to inbound demand like Hong Kong and Singapore exhibit similar characteristics. Markets with larger domestic travel like Jakarta, Seoul, and Tokyo form another group. Ratios are higher in mainland China, driven by a larger domestic travel market and fewer inbound (foreign) travellers. Understanding these ratios can be useful when considering the right type of operator, but also serve as a quick reference on what markets may be worth entering from the operator side. High barriers to entry may work in favour of the incumbent but make an entry more desirable given the prospects to achieve positive results. At the same time, lower barriers to entry may facilitate quicker growth at the expense of quality. 14
International Hotel Brand Penetration in APAC July 2022 Conclusion Overall, the penetration rate of internationally branded hotels suggests that most hotel markets have potential to add more branded hotels, especially in mainland China and Southeast Asian countries. Given the profile of the existing supply we caution at the same time that international brands may not match domestic market needs and present limited growth opportunities. We have seen several international operators move away from one-size fits all approaches and further introduce country-specific brands to better cater to demand from guests and owners. Meanwhile, the relationship between existing hotel properties, population and inbound travellers suggest the dynamic of the hotel market in this context, and it can be taken as a reference for market entry and expansion. Appendix 1 List of the participating operators in HOG 9th edition in alphabetical order Absolute Hotel Services Group Hotel Shilla Outrigger Hospitality Group Accor Huazhu Group Global High-End Brands Ovolo Group AKARYN Hotel Group Hyatt Pan Pacific Hotels Group Archipelago International IHG Park Hotel Group Artyzen Hospitality Group Jumeirah Group Prince Hotels & Staywell Holdings Banyan Tree Holdings Limited Kempinski Hotels S.A Red Planet Hotels Belmond Langham Hospitality Group Rosewood Hotel Group BWH Hotel Group Lanson Place SH Hotels & Resorts Capella Hotel Group Lotte Hotels & Resorts Silks Hotel Group Centara Hotels & Resorts Mandarin Oriental Hotel Group Six Senses Club Med Marriott International Soneva Dorsett Hospitality International Melia Hotels International Swire Hotels Dusit International Minor International Pcl. Swiss-Belhotel International Empark Hotels Group Minyoun Hospitality The Ascott Event Hospitality & Entertainment Narada Hotel Group The Standard International Far East Hospitality Management Oakwood Worldwide Wanda Hotels & Resorts Galaxy Entertainment Group Okura Nikko Hotels Wharf Hotels Hilton ONYX Hospitality Group Wyndham Hotels & Resorts 15
About AP Hospitality Advisors About the Authors AP Hospitality Advisors is an advisory firm Anchi Liu is an analyst founded by Dan Voellm, MRICS in 2011 in with AP Hospitality Hong Kong has seen the opening of Advisors in Hong additional offices in Bangkok and Shenzhen. Kong. She graduated AP Hospitality Advisors serves owners, from The Hong Kong investors, developers, operators, and Polytechnic University lenders of hospitality assets across Asia- with degree in Hotel Pacific. The team blends expertise in Management. Prior to operations, real estate, and finance to joining AP, Anchi support any critical step in the asset lifecycle. gained experience in hotel operations with Six Senses Hotels and project management AP Hospitality Advisors provides a range of with real estate developer in Hong Kong. services: aliu@ap-ha.com • Market Studies • Economic Feasibility Studies Dan Voellm, MRICS • Valuations – Royal Institute of is the CEO & Founder Chartered Surveyors certified of AP Hospitality • Asset Management Advisors, responsible • Performance Assessment for all aspects of the • Sustainability Audits & Benchmarking firm. Based in Hong (EDGE) Kong he covers the • Repositioning studies entire APAC region. Dan works closely For a variety of asset types: with key institutional and private owners of hotel properties, financiers, developers, and • Hotels investors, and has gained a strong • Resorts understanding of their investment • Branded Residences requirement and approaches to assessing • Serviced apartments market values of investment properties. Dan • Wellness further advises on property and concept • Mixed-use & masterplans development and strategy as well as expert • Gaming witness testimony. • Golf Dan is vice-chair of the Urban Land Institute’s (ULI) Hospitality Development Contact us when you face your next Council in Asia Pacific and became a decision that matters! Professional Member of the Royal Institute of Chartered Surveyors in 2016. dan.voellm@ap-ha.com www.ap-ha.com +852 3628 3870
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