Xiamen ( also called Amoy ), the South-east coastal city of China , tiny and peaceful. Striked by the Global Hotel Giants these years, and it is now modernized. Xiamen Hotels are now stepping into the World Class , the Sheraton , the Intercontinental ,the Wandyam, Le Meridien , the Pan Pacific, don't forget my hotel, Millennium and Copthorne ; meanwhile , the new comers in the next one or two years : the Westin , the Kempinski , and whoever more...
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The appetite for development financing is alive and well in Asia Pacific, and it is business as usual for regional lenders.
By Adam KirbyASIA PACIFIC — The Asia Pacific hotel market has felt the impact of the downturn, but thanks to massive emerging economies that refuse to be stopped and localized financing practices that have kept pipelines healthy, the East continues to be where the action is. The region is at the head of the global recovery, with Jones Lang LaSalle Hotels reporting evidence of markets hitting bottom late last year. Promisingly, the financial sector is showing signs of increased demand, particularly in the economic hubs of Hong Kong and Singapore, JLLH says, and net absorption rose 20% across the region in the fourth quarter, although it will likely remain below pre-recession levels through 2010.
Just about every international hotel company with a presence in the region continues to have some kind of development under way in China. Some experts worry that China’s real estate market may be overextended—residential property transactions soared 80% in total value in 2009 over the previous year, and property values in Shanghai are up a staggering 150% since 2003—but whether the country market ultimately proves to be an inflated bubble or merely an underdeveloped giant playing catch-up, hotel development there continues largely unabated. The appetite for development financing is alive and well in Asia Pacific, and it is business as usual for regional lenders.
The Ritz-Carlton, Hong Kong, will be the world’s highest hotel when it opens later this year. The hotel will occupy floors 102 to 118 of Kowloon’s International Commerce Centre.
Indeed, across the region, there continues to be a preference among developers for luxury and upscale hotels. The branded mid-market segment remains in its infancy in Asia, although it is starting to emerge as a compelling business opportunity. "There seems to be no end in sight for India and China, with their robust middle class and growth-oriented economies," says Ed Fuller, Marriott International's president and managing director of international lodging.
Marriott has one of the larger approved pipelines in the region, totaling 15,574 guestrooms under development, about half of which are slated for China. Those figures do not include Marriott's Ritz-Carlton Hotel Co. division, which expects to open two hotels in China this year, boosting its portfolio there to eight. The 295-room Ritz-Carlton Shanghai, Pudong, is slated for a May opening, while The Ritz-Carlton, Hong Kong, will be the world's tallest hotel, occupying floors 102 to 118 of Kowloon's International Commerce Centre.
Langham Hotels International remains as bullish as ever on the Eastern half of the proverbial BRIC economic engine of Brazil, Russia, India and China. "We still see the new Silk Road of China through India to the Middle East as the backbone of our expansion," says Helmut Knipp, Langham's senior vice president for development. "China is a major engine of growth for the rest of the world. Its numbers remain incredible, whichever way you cut them, and continues to be a massive opportunity
that satisfies both our long-term and medium-term growth."
Langham selected China to launch its upscale Eaton Luxe brand later this year; the 204-key property is under development in Shanghai by Greenland Group. A second Eaton Luxe—classified as a “modern 5-star” brand—will also open in Shanghai, in 2011. The first property of midscale brand Eaton Smart is under development in Nanchang, to open in 2011.
Millennium & Copthorne plans to extend its footprint in primary and secondary cities in China, the country that Lawrence Yip, M&C’s executive director for China, believes will be Asia’s first to emerge from the downturn due to its large domestic base of travelers and increasingly strong infrastructure. M&C opened two hotels in the country last year, in Wuxi and Chengdu, bringing its China portfolio to six.
Name-Recognition Crucial In China
Starwood Hotels & Resorts Worldwide is relying on Asia expansion to drive much of its growth over the next few years, with its biggest emphasis on the world's most populous country. Starwood CFO Vasant Prabhu anticipates Asia soon accounting for 25% of the company's total business, up from 15% currently. Starwood plans to double its China portfolio to 100 or more hotels in the near term, and Prabhu eventually sees China becoming the company's second most important country market, behind the United States.
Starwood’s China strategy is as much about domestic demand as it is outbound travel, with the company projecting the Chinese to generate as many as 100 million foreign trips each year in the near future. “When the Chinese do travel, they are going to stay in the brands that they know from home, which will have a meaningful effect on our business globally and underscores why we are so focused on this critical market now,” says Simon Turner, Starwood’s president of global development. Starwood’s Luxury Collection will make its China debut in May with the newly renovated Astor Hotel in Tianjin, and a new resort in Sanya is slated to join the brand in 2012.
China’s third largest city, Guangzhou, is seeing a rush of hotel development in advance of the 2010 Asian Games in November. At least a dozen luxury hotels comprising nearly 4,700 guestrooms are targeted to open before the competition, including a W, a Marriott and a Sheraton. The new supply will nearly double the city’s existing inventory of 8,100 keys.
In China’s gaming enclave of Macau—which saw development activity stall with the onset of the downturn in late 2008—projects are restarting. In fact, the largest project in Marriott’s global pipeline is the 968-key Macao Studio City Marriott Hotel, targeted for a 2014 opening.
The guestroom inventory of the world’s gaming capital is projected to grow by almost half by 2012, led by a mammoth 6,000-key resort from Las Vegas Sands Corp. that will likely open sometime next year. Meanwhile, Hong Kong-based Galaxy Entertainment has three hotels comprising 2,200 rooms under construction near the Cotai Strip. MGM Mirage’s initial public offering of its Macau assets will be complete in the third quarter, with plans to sell US$850 million in secured bonds by June. Macau occupancy declined 3 points last year to 72%, due in large part to Macau room inventory rising by 10%.
Singapore is suddenly a major player in regional tourism, boosted by the newly opened Resorts World Sentosa and Marina Bay Sands integrated resorts, giving the city-state a chance to compete for a chunk of the huge Asia gaming market dominated by Macau. Singapore expects to draw 12.5 million foreign tourists this year, up 29% from 2009.
M&C will open its first hotel under the Studio M brand in Singapore during the second quarter; the brand is positioned as an urban, contemporary alternative for tech-savvy travelers. Elsewhere in the city-state, M&C is converting its Copthorne Orchid Hotel into condominiums in a bid to generate about d10 million in cash.
Mark Edleson, president and CEO of Singapore-based Alila Hotels and Resorts, says Bali has been among Asia’s most resilient markets during the downturn, with arrival numbers up in 2009, although long-haul business has been giving way to shorter-haul regional trips there, and average length of stay and spend per visitor have declined.
Conversion and repositioning of existing hotel assets should be on the rise in a surprising number of Asia markets in the coming years, says Andrew Clough, senior vice president of development for Hilton Worldwide in the Middle East and Asia Pacific. “This 'recycling’ of existing hotel stock is a big feature in many Western markets, and it is one that will continue to grow in Asian markets,” Clough says. Five existing hotels converted to Hilton brands in 2009 across the Maldives, French Polynesia and New Zealand.
New-build projects remain the far more common growth route in the region, though, with Hilton Worldwide looking to step up the pace of new openings in China, Australia and especially India. Hilton plans to add 100 hotels to its India portfolio in the next decade across several brands, with up to four openings possible this year. Hilton has 75 hotels in its Asia pipeline—mostly upscale, full-service projects—and 60 hotels in operation.
India Starts Rebound
IHG is looking to nearly double its Asia Pacific portfolio, with 213 hotels comprising 65,174 guestrooms in the pipeline. India remains a key engine of IHG’s expansion in the region, driven by its InterContinental, Crowne Plaza and Holiday Inn brands, the last of which accounts for about three-quarters of IHG’s India pipeline. The India hotel market looks to be bouncing back already, with STR Global data indicating substantial year-on-year revPAR increases in December and January, stopping 14 consecutive months of declines.
Carlson Hotels is planning to nearly triple its India portfolio by 2012, an expansion that would make it the fastest growing international hotelier in the country. Carlson looks to add 50 properties across its Radisson Hotels & Resorts, Country Inns & Suites, Park Plaza Hotels & Resorts and Park Inn brands, and its luxury Regent brand is targeting 2013 to debut in India with a property in Gurgaon. To support its aggressive India expansion plans, Carlson in January bought a majority stake in RHW Hotel Management Services Ltd., which has managed Carlson-branded hotels in the country since 1998. The acquisition creates an integrated organization for Carlson in India, bringing project development, operations and sales and marketing under a single umbrella.
Tata Group is planning to more than triple its India-focused budget Ginger brand by 2014, growing it from 20 to perhaps 70 properties totaling about 7,000 guestrooms. Tata believes the mid-scale segment in India remains a growth market, as international brands have been slow to enter many markets there.
Tata rival Hotel Leelaventure has its expansion focus more upmarket in its homeland, developing new luxury properties in New Delhi, Agra, Hyderabad, Pune and Chennai. The development pipeline entails investment of about US$293 million by 2015, half of which will be raised through the sale
of convertible bonds and institutional placements.
Local Banks Keep Lending
Asia has always been less dependent on large amounts of leverage to get projects financed than elsewhere. Relative to other regions, the downturn has not impacted development funding in China, says Matthew Fry, Starwood's senior vice president of development for Asia Pacific, as Starwood's partner developers in the region have strong ties with local banks, many which never stopped lending. However, in a handful of localized markets—Japan and Australia in particular—some hotel companies say new project finance is very challenging.
Still, that may be turning around, too. In Australia, CDL Hospitality Trusts—the REIT arm of M&C—recently acquired five freehold hotels in Brisbane and Perth. The acquisitions are based on strong market fundamentals seen in these two cities based on their potential for tourism and hospitality growth, Yip says.
The global downturn has had only a moderate effect on the existing Australia hotel market, as the domestic economy remained relatively robust, but few new development opportunities exist in the region, Fry says. Construction and labor costs are high, and average daily rates in major cities like Sydney and Melbourne remain lower than other global gateways, making it hard to justify new projects.
In the case of New South Wales-based Constellation Hotels, it was foreign expansion that took the biggest hit in 2009, as cash-strapped investors and developers deferred new projects.
Constellation in 2010 is moving forward beyond Australia into New Zealand and Bali, led by its midmarket Chifley International Hotels brand. Managing Director Jonathan Wooller agrees that China and India pose the best growth opportunities going forward, but he says Thailand, Singapore and Malaysia—and, to a lesser extent, Indonesia, Vietnam and Cambodia—will benefit from a spillover effect.
“Development interest in both China and India remains strong, with the burgeoning in growth of the traveling domestic business sector,” Woolley says. “A number of projects have stalled as a result of uncertainty created for some of our funding partners.” Such stalls are seen as a short-term phenomenon, however, he says. In Australasia, financing for hotel projects is coming from individuals, developers and investment vehicles looking for longer-term exposure in the sector, Woolley says.
Hilton’s Clough reports a shift in the financing model in Asia. “In the past, and prior to the global financial crisis, there was much more cross-border financing of projects, whereas today we are seeing more domestic financing,” Clough says. “In the past, it would be fair to say that some of the financing models were more creative and assertive. It was common to have multi- layered debt and mezzanine financing or hybrid debt models. Today, the world is more conservative in respect of gearing ratios, and the result is the majority of deals are financed through domestically held, more 'plain-vanilla-style’ bank loans.”
M&C is financing its China projects from a strengthened balance sheet, having reduced its debt by nearly a third last year, and from cash reserves and committed bank facilities. Acquiring financing from regional Asia banks remains possible, Yip says. “It is relatively easier to finance new developments in Asia than other parts of the world because of liquidity here,” he says. “We have the necessary funds and access to bank lines, but we need to review possibilities of employing them for new developments in Asia.”
Sri Lanka Poised To Sprout
Sri Lanka is finally emerging from a bloody 30-year ethnic war, with many hotels in the country reporting full occupancy throughout the fourth quarter and into the new year and tourism to the country up 32% in January year-on-year. A pair of home-grown hotel companies are gearing up for an influx in tourism—John Keells Hotels Group and Aitken Spence Hotel Holdings, both based in Colombo, are set to embark on share offerings to raise funds for expansion.
John Keells in February announced an offering of 364 million new shares worth US$32 million to renovate some of its eight hotels on the island nation southeast of India, and to open new resorts. The company’s offerings include the upscale Cinnamon Hotels & Resorts brand.
Aitken Spence announced its own offering in February of 9.6 million shares, aiming to raise US$22 million to finance future investments. Aitken Spence owns and manages luxury hotels in Sri Lanka, India, Oman and the Maldives—where it is the largest international operator—under three brands: Heritance Hotels & Resorts, Adaaran Luxury Boutique Wellness Resorts and Aitken Spence Hotels & Resorts.
The Sri Lanka Tourism Development Authority is making a push to develop the western peninsula of Kalpitiya and its surrounding islands as an upscale eco-tourism destination. The tourism organization believes the remote region could support as many as 1,200 new guestrooms and is soliciting proposals from international developers. Alila’s Edleson says Sri Lanka has “outstanding resort potential in the mid-term,” provided the political situation remains calm.
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