As our destinations boom could there still be risk around the corner for hotel investors? As Yeoh Siew Hoon discovers, the educated answer is - maybe.

The outlook couldn't be more bullish. The hotel industry is awash with capital looking for homes. The economies in Asia are booming, fuelled mainly by China and, to a lesser degree, India.

At every investment conference, hotel chief executives find it hard-pressed to point out any reason, other than the unforeseen, that could possibly burst the hotel bubble.

At Jones Lang LaSalle Hotels' 10th Asia Pacific Investment Conference in Singapore in May, the company reported a record year in hotel transactions worldwide – US$10 billion.

Asia Pacific showed the fastest growth and this year, transaction volumes are expected to rise to US$8 billion, up from $5 billion a year ago.

Capital is flowing in from all areas, from the Middle East to new sources such as China and India. "We will not be seeing any significant slowdown in investment activity," predicted Arthur de Hasst, Global CEO of JLL Hotels.

So what could possibly go wrong? Or what could be the limits of growth?

Dr Helmut Schutte, professor of international management of INSEAD, said the world economy was growing at its fastest in 40 years. "Will this continue?" he asked, observing that the problem was that "there is no way to discover when a bubble is a bubble until it bursts".

"We could safely say the Shanghai stock market is a bubble but at the same time, the world is different today from yesterday. Are there new economics at play? Are we seeing the beginning of a new era? It would be pretty daring to find a reason to say so."

China is the locomotive of growth and India, the latecomer, has joined the club. "The question to ask here is why the hell did it take India so long to join the club," said Prof Schotte.

Japan, the revitalised giant, has also joined the club while the rest of Asia is a mixed bag. Thailand is showing worrying signs but its economy is doing well. Asia (including Japan) is showing growth of seven percent, the highest rate in history.

Based on the three key drivers of labour input, investment and productivity growth, Asia could well grow by 10% this year, projected the professor.

The concern, he said, was the obsession with growth over development.

Describing growth as "a safe haven for technocrats and easier to achieve and measure" and was virtually guaranteed, he said there was a need to look into development issues.

"There were 71,000 riots in China in 2005, farmers ran out of water in India, every year the haze visits Singapore and Malaysia, there is increased pollution in Hong Kong and we have public transport issues in major cities.

"Can governments cope?"

He cited a Businessweek chart projecting the world's economy into 2050. It showed China's share growing from four percent in 2005 to 15% in 2025 and 28% in 2050, while Europe went from 34% to 25% and 15% respectively.

"The life of people is not determined by having plenty of people in one place," he said.

Income per capita of the Chinese was US$1,000. Assuming the Chinese economy grew by 10% every year, that would mean US$100 more to the per capita income per annum.

Compare that to the French whose per capita income is US$30,000. "Even if France is stuck at one percent growth, that's still $300 more each year. So during that year of high growth in China and slow growth in France, the average Frenchman is still $200 ahead of the Chinese.

"So it will take many years for the average Chinese and Indian to reach the average income of the French. I will long be dead and dare I say, you too."