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Emerging giants boost hotel results.
Wednesday, 25th October 2006
Source : HotelBenchmark™ Survey by Deloitte
Looking back over the first six months of 2006 Asia's hotels have continued to perform well, with revPAR up 7.5% on the same period the prior year.

Again average room rates continue to drive performance. South Asia and South-East Asia were the clear winners both seeing double-digit increases. At the back of the pack and showing little growth were North-East Asia and Oceania.

Extract from the Asia Pacific Performance Review released this month.

South Asia
Despite being a relatively small tourist destination in terms of international arrivals – South Asia's hotels have seen remarkable growth. During the first six months of 2006 revPAR has increased by 40.4% to US$110. India's strong growth in average room rates and consistently high occupancy levels are the main factors driving this upward trend across the region.

Hotels in India have seen impressive growth over recent years – with revPAR increasing 31% in 2005. Half year results show that this rate of growth has continued this year – with revPAR increasing by 35% to US$116 – reaching its highest level ever.

With Delhi gearing up for the 2010 Commonwealth Games, its hotel market is now performing well above most other Asian cities. At US$155, Delhi achieved the second highest revPAR in Asia during the first half of this year – outperformed only by Tokyo.

It's a similar story across all India's primary cities, with Chennai, Kolkata and Mumbai, seeing double-digit revPAR growth driven by average room rate. The latest terrorist attacks in Mumbai have had no immediate impact on hotel performance. Although occupancy levels dipped slightly by 2.4% to 68.3% in July, this is in line with other primary cities with occupancy falling across the board. Despite impressive performance across all primary cities, Delhi still leads the way in terms of average room rate with Mumbai trailing some US$32 behind.

A shortage of accommodation and the growth of India's middle classes are the key drivers behind the increases in average room rates. In key cities, demand is outstripping supply and hotel rooms are scarce. Most major chains continue to look to fill this gap with Hyatt, Hilton, Starwood and Marriott all expanding across India. However with hotel demand expected to grow at 18% annually for the next few years, major cities will continue to suffer supply shortages.

India's strong emerging economy is another factor behind this impressive growth. The increasing affluence of the country's middle classes has helped spur on the development of the low-cost airline industry. With many companies continuing to take advantage of the low operating costs in India, business travel should increase, enabling hoteliers to push average room rates up even further.

South-East Asia
Six months into 2006 and South-East Asian hotels have seen the second strongest growth in the region with revPAR up 16.9%. Again improvements in average room rates have been the key driver of performance across the region.

Following the tsunami in December 2004, Phuket experienced 12 consecutive months of revPAR declines. However, by the beginning of 2006, the resort was starting to get back on track and during the first six months of this year, revPAR was up 66.9% on the same period last year – albeit from a low base.

Although there had been concerns that the political demonstrations in Bangkok earlier this year would damage tourism, Thailand's capital has enjoyed a successful six months, with average room rates up 11% to US$96. However, it remains to be seen whether September's coup d'état will affect tourism and have an impact on hotel performance going forward.

In Singapore, hoteliers managed to achieve one of the highest occupancy levels in Asia during the first six months of 2006 at 78.7%. The city's future looks good, if it manages to achieve the 90% growth in international arrivals over the next ten years. In order to service this potential demand – Singapore Airlines plans to introduce the much publicised A380 aircrafts to its fleet. The airline has ordered 19 of these carriers, which seat 555 people; this is the second largest order after Emirates, which has 43 on the way. If all goes to schedule, Singapore Airlines hopes to bring the new carriers into service between 2008 and 2010.

Hotel performance in Vietnam reflects the country's strong economy and increasing popularity as a tourist destination. Following the tsunami, Vietnam saw visitor numbers jump as tourists sought alternative destinations and hoteliers benefited from double-digit occupancy growth. It's a different picture in 2006, with average room rates driving current growth. Overall, revPAR in both Hanoi and Ho Chi Minh has increased by 25.3% and 14.1% so far this year.

When a series of bombs ripped through restaurants in the resort areas of Jimbaran and Kuta in Bali in October 2005, hotel performance faltered. Although occupancy during the first six months of 2006 has fallen by 18.7%, average room rates have remained strong. It is expected that these attacks will have less of a long-term impact than the first bombings in 2002, as world travellers become more used to dealing with the threat of terrorism.

North-East Asia
Markets across North-East Asia reported mixed fortunes during the first six months of 2006, resulting in moderate revPAR growth of 3%. While cities in Japan, South Korea and Taiwan all experienced a downturn in performance – growth across China kept the region in positive territory.

During the first six months of 2006, revPAR increased 9.3% across China. Again, average room rates were the key driver, while occupancy fell 1.7%. Regular additions to room supply has resulted in occupancy levels falling in Beijing, Macau, Nanjing, Shanghai, Shenyang and Xian – up to 8% in some cases. However, new supply is expected to be absorbed as visitor numbers continue to grow.

Beijing, frantically preparing for the 2008 Olympics, saw average room rates increase 14.2% to reach US$78. Occupancy levels dipped 5% during the first six months of 2006, despite Beijing Capital International Airport reporting a 20% increase in passenger arrivals. However, this blip will hopefully soon be a distant memory when visitors start to pour in for the Games and average room rates are expected to reach their highest levels yet.

Hong Kong achieved the third highest revPAR throughout Asia Pacific at US$142, behind Tokyo and Delhi. Riding the same wave, this growth was driven by a 17.7% increase in average room rates and a 4% increase in occupancy. The market has benefited from increased demand stemming from the ‘Discover Hong Kong 2006' campaign, covered earlier.

Oceania
Across Oceania hotel performance has remained relatively static during the first half of this year – at 0.8 % revPAR was the slowest growing of any region.

It was the same picture in Australia, where growth was nominal. Over the first six months of 2006 revPAR grew 2.8% driven equally by occupancy and average room rates.

On the up side, March hotel performance in Melbourne was seriously boosted by the 2006 Commonwealth Games which saw the city achieve its highest ever revPAR at US$160. This helped to push revPAR up 8.4% during the first six months of this year. However, it's not just been the Commonwealth Games that has attracted visitors to the Victorian capital, over the past seven years international arrivals have leapt 68%. In Sydney hotel performance was not as impressive. The city saw the greatest declines in revPAR of any tracked in Australia – down 3.5%. Hotel performance has been held back by weaker demand from the MICE market this year as well as increased supply following the re-opening of the 577-room Hilton Sydney in June 2005.

Across the Tasman Sea, the sun was not shining for New Zealand's hoteliers who have seen revPAR fall 11.9% during the first six months of 2006. However, given the relative weakness of the New Zealand dollar, performance in local currency looks more positive, with revPAR falling only 1.5%. These results are not surprising, given the 1% fall in visitor arrivals year-to-June 2006. However, with the "100% Pure New Zealand" marketing campaign gaining momentum across the globe this should have a positive impact on hotel performance going forward.

Asia Pacific Performance Review – A winning hand
The full Asia Pacific Performance Review is now available to all survey contributors in the HotelBenchmark™ Update section within the Members' Area on HotelBenchmark.com. Non-members can order their copy of the Asia Pacific Performance Review at a special rate, simply contact Tina Wanstall to find out more.

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