Business-leisure travel, long-stay services next growth opportunity for hoteliers

HOTEL owners and operators are investing in new facilities as they hope to take advantage of shifts in travel behaviour that are bringing new opportunities.

“As the boundaries between work, life, and travel become more blurred, traditional hotel brands and investors are urged to diversify their product offerings into non-traditional hotel verticals,” said real estate consultancy JLL. These include branded residential spaces, short-term rentals, co-living arrangements, private membership clubs and other niche markets.

Hotel investment volume in the Asia-Pacific (Apac) region has been suppressed this year due to escalating borrowing costs, inflationary pressures and uncertainties stemming from volatile geopolitical environments.

According to JLL’s Hotel Investment Highlights report, Apac investment volume from January to October 2023 totalled US$5.92 billion. This was a 39.8 per cent decrease from the US$9.83 billion recorded in the corresponding year-ago period.

That trend could reverse, however, as the hospitality sector is pushed to change. Ramzy Fenianos, Apac chief development officer for Radisson Hotel Group, said travellers are “increasingly seeking experiential travel while staying at full-service hotels”.

Radisson offers a “local experience package” to its guests that includes event tickets or unique activities.

At Accor Hotel Group, meanwhile, the extended-stay market is a key element of its growth strategy. Garth Simmons, Asia chief executive officer for Accor’s premium, midscale and economy division, said demand is fuelled by heightened flexibility on business trips.

More travellers now opt for prolonged journeys – mixing business with leisure, and exploring destinations more fully. “There is also a growing inclination to bring family members along during these extended trips,” he added.

Investment in the hospitality industry is likely to be encouraged by improving numbers. The Global Business Travel Association expects business travel expenditure in Apac in 2023 to recover to 92 per cent of the value in 2019.

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Singapore, in particular, is likely to be a popular market. It is one of the cities experiencing the most significant growth in demand for serviced apartments, according to this year’s Global Serviced Apartment Industry Report, alongside Riyadh and London.

Accor’s Simmons said regional flows into Singapore, the recovery of Changi Airport’s capacity, and a compelling line-up of international business conferences and events are attracting travellers from across the region and beyond.

JLL’s figures show a robust recovery for Singapore’s luxury hotel segment, although the performance of midscale and economy hotels has lagged. These latter categories largely rely on tour groups and value-conscious leisure travellers – a segment that has been hit by the high cost of travel and slow return of Chinese tourists.

Singapore is already expected to see several new hotels next year, although JLL said the supply pipeline for 2024 is “benign, representing only 2 per cent of the existing supply”.

Radisson’s Fenianos believes domestic travel will also continue to be a “crucial” segment for hotels, especially in the Philippines and Vietnam.

The Radisson group has made Vietnam, Thailand and Sri Lanka its focus of development within the Apac region.

Since the beginning of 2022, the group has more than doubled its portfolio in Thailand with the signing of seven new hotels. In Vietnam, it has four hotels in operation and eight in the development pipeline.

“The Apac region is extremely diverse, and different markets are recovering at varying paces,” Fenianos said.

He is optimistic about growth next year, adding: “Demand from property owners remains strong, with hotels proving to be one of the most resilient asset classes.”

JLL, too, believes hotel investments in Apac will face more tailwinds than headwinds in the year ahead, with airlift recovering, rising room rates, easing cost pressures, and a more predictable debt market.

“Most core real estate asset classes are going through a period of evolution,” JLL said. “The hotel sector stands out as one of the best segments to be in due to the strong industry fundamentals.”

At the close of the third quarter, the hotel construction pipeline in Apac stood at 1,929 – up 3 per cent year on year – according to the latest Hotel Construction Pipeline Trend Report from Lodging Econometrics, a global hotel intelligence provider.

India led the way with 481 projects, followed by Vietnam with 243 projects, and Indonesia with 212. The construction pipeline in China reached a record high of 3,720 projects, up 3 per cent.

Luxury, upper upscale, and upscale chains accounted for over half (53 per cent) of the projects in Apac’s hotel construction pipeline, signalling a trend towards high-end consumption behaviour.