The Asia Pacific hotel market is experiencing a “year of contrasts” in 2024, according to real estate services firm JLL, as large events and holiday travel boost demand while business travel and leisure spending tighten.
High-profile events such as Taylor Swift’s concerts in Melbourne, Singapore, Sydney, and Tokyo, alongside Lunar New Year travel, have contributed to increased hotel occupancy rates. However, companies have scaled back their business travel budgets, and leisure travelers are more cautious with their spending.
Key Growth Drivers: China and India
Despite growth, China’s hotel demand remains below pre-pandemic levels. JLL also points to India’s emerging outbound travel market, driven by its expanding middle class, as another key growth opportunity.
According to JLL, improved investor interest and strengthening market fundamentals could lead hotel transaction volumes across the Asia Pacific region to hit $12.2 billion in 2024. Central to this are monetary policies and investor optimism, especially in core markets like Japan.
Investor Confidence Remains Strong
“The region’s strong tourism fundamentals, which have been more evident since borders reopened, will continue driving investor interest,” said Nihat Ercan, CEO of JLL Hotels & Hospitality Group, Asia Pacific, in an interview with Skift. Ercan also highlighted that the weakening of local currencies against the U.S. dollar is attracting investment.
Ercan expects travel momentum to remain strong into 2025, especially in Japan and South Korea, where favorable macroeconomic conditions are fueling growth. Meanwhile, safe-haven markets and emerging destinations are also drawing attention from investors.
Upscale and luxury full-service hotels are proving particularly attractive, accounting for 45% of the region’s total investment volume. Investor interest in these properties in resort destinations has risen by 4% compared to last year.
Ercan noted that inflation, which was a concern in the past, is now under control. “Countries that saw inflation spikes are now stabilizing, and medium-term inflation pressures are expected to be low,” he said.
Japan: A Leading Market
Japan is expected to remain a top investment destination, even in light of a recent interest rate hike. JLL predicts $4.7 billion in hotel transactions in Japan this year, driven by a weak yen and solid tourism demand.
Japan has consistently been the most active hotel market in the region, and JLL expects this to continue over the next 12-18 months. The company anticipates that larger full-service hotels will be traded by the end of 2024. Investors are focusing on major cities such as Tokyo, Osaka, and Kyoto, while emerging cities like Fukuoka and Sapporo are also attracting interest, particularly in midscale and limited-service properties.
As of September 2024, hotel sales in Japan totaled $3.8 billion. JLL forecasts this will rise to $4.7 billion by the end of the year and increase by 4% to $4.9 billion in 2025.
However, the strength of the yen could influence future investment. Ercan noted that a stronger yen could increase asset prices for international buyers and potentially slow down the influx of inbound travelers, which would affect Japan’s hotel revenue per available room (RevPAR).
Recovery in Mainland China
In Mainland China, hotel RevPAR has returned to 2019 levels during the first half of 2024, with cities like Sanya, Chongqing, Chengdu, and Xi’an leading the recovery.
Investment in Chinese hotels reached $1.8 billion by September 2024, a 6.4% increase compared to the previous year. More than half of these investments were in major cities like Shanghai and Beijing, and JLL expects total hotel transaction volumes to reach $2.1 billion by the end of the year.
However, growth may flatten in 2025 due to market uncertainties. “In Mainland China, domestic tourism has slowed due to the current economic situation, and inbound tourism has not recovered as quickly as expected despite visa facilitations,” Ercan explained. These challenges could affect the market in the short term.
Chinese tourists may also remain hesitant to travel if local economic conditions persist. Additionally, geopolitical tensions and trade issues could impact the sector further, Ercan warned.
India’s Rising Hotel Sector
JLL expects hotel transaction volumes in India to reach $440 million this year, with balanced activity across Tier-1 and Tier-2 cities. A strong pipeline of new hotel rooms is also driving growth.
Over the past 3-5 years, India’s hotel sector has seen significant expansion, with international brands increasing their presence across the country. Ercan highlighted that domestic tourism has been a major contributor to this growth in 2024, boosting room rates, revenue, and occupancy levels, ultimately leading to higher yields and improved earnings.
Looking ahead, Tier-1 cities will remain a key focus for investors, particularly those from overseas. However, Tier-2 cities are also gaining traction, fueled by a surge in domestic tourism.
“Tier-1 cities will continue to attract attention, but investors are increasingly turning to Tier-2 cities, given the robust growth in domestic tourism,” Ercan said.
Overall, the Asia Pacific hotel market is expected to remain strong in the coming years, with countries like Japan, China, and India leading the way in terms of investment and growth opportunities.