HOTEL INSIGHTS A quarterly digest of key trends in the hospitality sector - COLLIERS INSIGHTS - Colliers International
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COLLIERS INSIGHTS HOTELS | ASIA | Q2 2019
Govinda Singh
Executive Director
Valuation & Advisory | Asia
+65 6531 8566
Govinda.Singh@colliers.com
HOTEL INSIGHTS
A quarterly digest of key trends in the hospitality sector
COLLIERS INSIGHTS HOTELS | ASIA | Q2 2019
FOREWORD
‘’Robot‐assisted hotel services get
generally high marks in a study of guests
at 88 hotels in China.
Guests reported making fairly frequent
use of the robots, primarily for such
relatively simple functions as turning on
the lights and turning off the TV.
Chief problems occur when the robot
cannot recognise operation commands,
when guests must repeat their request,
and when the robot isn’t actually
programmed for a particular operation.
Asked what services they expect from a Welcome to the Q2 2019 edition of Colliers Hotel Insights, our quarterly magazine for hotel and other
hotel robot, guests cited food accommodation stakeholders across Asia. This edition features key destination trends across Asia, a
distribution, delivering goods, handling highlight of key industry disruptors, and a technical section. We also provide insights and opinions on
check‐in and checkout, and providing topical issues within the gaming and leisure sectors.
travel information and consumption Hotels across Asia Pacific have had a tough Q1 in 2019 when compared to the corresponding period in
recommendations. 2018, with overall room occupancy and average daily rate (ADR) showing decreases to 67.4% and
Two‐thirds of customers considered that US$103.46, respectively. This resulted in RevPAR for the region showing a decline of some 7.2% year‐
“robot rooms” present a good value, and on‐year. We note this figure would have been negatively impacted by forex currency movements
together with economic fundamentals. In terms of room occupancy, Delhi‐NCR, Metro‐Manila and Seoul
a similar proportion were willing to make
were the stand out performers, with year‐on‐year growth in excess of 3%, according to STR. HCMC, KL,
a return visit to rooms equipped with and Phuket led the crowded field in being the worst performers.
robots.
In local currency terms, Bali, Hanoi, Mumbai, all witnessed increases in excess of 7% in terms of ADR.
Keys to the acceptance of hotel robots KL, Phuket, Sanya, Seoul and Shanghai witnessed declines, with Osaka slipping significantly.
are that they must provide worthwhile
It is evident that the recent escalation in the trade dispute and political impasse between the USA and
services and be easy to use.”
China is starting to weigh on business and consumer confidence, thereby tempering demand growth.
– Extract from “Robot Rooms” How Guests This, combined with movements in forex, the Mount Agung eruption, and the fall in the number of
Use and Perceive Hotel Robots – Cornell Chinese visitors to Thailand, together with new supply in some destinations has all significantly
Centre For Hospitality Research (2019) impacted performance. However, we note that intra‐Asia and growing domestic travel in the larger
destinations across Asia, is likely to continue to underpin demand in the region. As such, we would
expect some upturn in performance in the coming months. On that note, good reading!
2
COLLIERS INSIGHTS HOTELS | ASIA | Q2 2019
TABLE OF CONTENT
Page Page
HOTELS 3 GAMING UPDATE 11
Opinion: Hotel Feasibility Studies 4 About Colliers Hotels 13
Destinations of the Quarter – Singapore 5 Next Quarter / Contacts 13
Destinations of the Quarter – Kuala Lumpur 8
HOTEL INVESTMENT AND VALUATION 10
Capital markets insights 11
Recent notable transactions 11
3
COLLIERS INSIGHTS HOTELS | ASIA | Q2 2019
HOTELS OPINION
The hotel feasibility study – Is it worth the time and cost?
Our specialists take on the do’s and don’ts of hotel investment
As the time for build it and they will come ends for many destinations as they mature,
and with an ever increasing competitive environment, investors have begun to ask
the right questions. Questions, that in our opinion must always be asked before a
hotel is built.
First of all it is important to differentiate between a market research report and a
feasibility study. Whilst a market research report may do well in providing enough
information for decision making for ‘traditional’ assets, for hotels and other any
property type that has dynamic cash flows such as casinos, golf, meetings, incentives,
conference and exhibitors (MICE) etc., this is hardly sufficient. The true value in a
feasibility study is not to gain market data (most of which is readily available in this
age) but in obtaining insight, information and recommendations from specialists who
have had hands on experience in the industry. Developing a proposition that is:
> Relevant – Will it still be relevant three years plus from now (i.e. for new projects
allowing time for construction)? Will it still be relevant 20 years from now?
> Focused – What should be the number of rooms and mix? What market
positioning and facilities/amenities should be provided to ensure success? Suite
mix, number of covers, destination concepts or not? To brand or not to brand?
> Consider competitive environment – what is the impact of demand generators in
the area and how will the hotel integrate with the wider development and
destination seamlessly? How can it be leveraged to add value? What does the
existing and future competitive landscape look like and what would the impact be
on the proposed development?
> Maximises ROI – Even if the motivation is not to make a profit, it is important for
the hotel to be self sufficient to avoid future operating challenges. Does the
business model stack up for lending and operating cashflows?
In an increasingly competitive environment, it is vital that hotels stay relevant well
into the future, at least taking their fair market share. Preconceived concepts may
work in less mature destinations, but as experience has taught us, these have a habit
of not remaining relevant, at tremendous cost to the owner over time.
4
COLLIERS INSIGHTS HOTELS | ASIA | Q2 2019
DESTINATIONS OF THE QUARTER
Singapore
Singapore tourism statistics 2011–2019F
Room stock Tourism arrivals (m) Tourism receipts (S$bn) Visitor days (m)
100 68,444 69,214 70,929 80,000
60,841 63,706
80 55,018 57,050
49,719 51,579 63.4 60,000
56.3 58.8 61.6
60 51.4 54.2 56.1 55.0
49.1
40,000
40 26.8 27.1 27.9
22.3 23.1 23.5 23.6 21.8 24.8
20 20,000
13.2 14.5 15.6 15.1 15.2 16.4 17.4 18.5 19.2
0 0
2011 2012 2013 2014 2015 2016 2017 2018 2019F
Source: STB
Hotels in the Garden City continue to do well 2016, increasing by a whopping 8% into 2017 and another circa 1% in 2018.
The increase in tourism receipts was boosted by more tourist arrivals from
Tourism arrivals in Singapore are expected to grow by 3.5% in 2019 high‐spending markets such as China, South Korea, the US and the UK. In
following a relatively strong performance in 2018. In 2019, visitor arrivals are addition, the forecast for tourism receipts is to grow by another circa 3% in
expected to reach 19.2m, with a further 3% growth forecast for 2020. This is 2019 mainly attributed to higher spending in sightseeing, entertainment,
a robust performance after the stagnant figures in 2015, and strong growth gaming and shopping for health and wellness products.
in 2016, and is mostly underpinned by an increase in visitation from North
and South Asia, and in particular China, Indonesia and India. Tourist arrivals According to the Singapore Tourism Board (STB), circa 55% of overnight
from India have seen the highest spike of 13% with cruise arrivals going up stays are in hotels (latest available), of which 47% of visitors are repeat
by 27%. This growth represents a compound annual growth rate (CAGR) of guests. The main purpose of visit is leisure/VFR (Visit Friends/Relatives)
6% between 2010 and 2019f. In 2018, the average length of stay fell to 3.3 (70%), with circa 14% here on business/MICE visits. Considering these
days, from 3.4 days previously recorded. However, total visitor stays (what statistics, it suggests that Singapore still requires a significant amount of
really matters to hotels), grew by a CAGR of 4.8%. With the changing travel hotel rooms to accommodate its visitors, with growth in visitation being
habits of travelers from nearby source markets, the average length of stay is tempered by the low level of room supply especially at the mid‐market to
expected to dip slightly as day trips and shorter corporate trips become a lower end. This is despite the addition of 2,865 rooms in 2016 and the
common sight in Singapore. This is perhaps not surprising given the relative significant 7.4% increase in 2017 (4,738 rooms). Although there were only
high costs of staying in hotels in Singapore, with ADR increasing 1.7% to 770 rooms added in 2018, we note that an estimated 1,700 rooms are
S$219 by the end of 2018. expected to enter the market in 2019, as room supply continues to be
moderated in Singapore.
Tourism receipt per capita decreased from S$1,691 in 2011, to S$1,430 in
2015, a drop of 15.4%. However, tourism receipts started to rebound in
5
COLLIERS INSIGHTS HOTELS | ASIA | Q2 2019
Hotel supply to remain muted in the short term From our analysis, in 2012, given that 65% of overnight visitors would stay in
a hotel, based on the total number of available rooms at that time gives an
With the recent tender of the government land site at Club Street, the white implied room occupancy of 134%. From the hotel statistics provided by STB,
sites at Pasir Ris Central and Marina View, which can together potentially which indicates that room occupancies for 2012 were 87%, this suggests
accommodate circa 930 rooms, in our estimation, we expect another 2,500 only circa 64.9% of those requiring accommodation were able to do so
rooms to be added between 2022 and 2025. Significant new hotels in a hotel.
scheduled to open beyond 2021 include the Pullman Singapore (342 rooms),
Banyan Tree Mandai (400 rooms), and Club Street (390 rooms). In addition, Fast forward to 2018, when hotel room occupancies have dipped slightly to
in circa 2025 we expect Marina Bay Sands (MBS) and Resorts World Sentosa 86% for the year, indicating that only 46% of the 55% requiring rooms would
(RWS) to add 2,100 rooms as part of their integrated resort (IR) expansion have been accommodated. We note that the implied room occupancy for
plans. It is therefore likely that demand will continue grow as the IRs expand 2017 would have dropped to 107%, given the increase in new supply. This
their offerings. remained rather stagnant in 2018, nevertheless, we expect implied room
occupancy to rebound in 2019, given the growing demand from
Singapore hotel room stock vs overnight stays international arrivals. Perhaps its time to reconsider more development and
investment in this sector.
Room stock Overnight stays In 2018, occupancy grew to 86%, with average daily rate (ADR) increasing by
100,000 80 1.7% resulting in a revenue per available room (RevPAR) growth of 3.5% to
S$188.6. This was mainly underpinned by the substantially low supply of
80,000 new hotels entering the market against a backdrop of surging visitor arrivals.
60
Hoteliers were therefore able to maximise their yield strategy through
60,000
40
higher room rates.
40,000
Singapore hotel KPIs
20
20,000
ADR (SGD) RevPAR (SGD) Room occupancy (%)
0 0
300 88
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019f
2020f
2021f
2022f
2023f
2024f
2025f
2026f
87
250 87
200 86
Source: STB, URA and Colliers forecast 86
150 85
85
In terms of hotel performance, room occupancy remains well in excess of 100 84
83% despite the new supply. In any event, a closer look at the room stock 50 84
versus demand, suggest that hotels in Singapore are full almost all the time 83
0 83
during peak periods, and especially during Monday to Thursday, and
2012 2013 2014 2015 2016 2017 2018 Feb Feb
Saturday nights. This suggests that there is a high degree of existing 2018 2019
frustrated and latent demand, whereby visitors who wish to come to YTD YTD
Singapore either cannot find rooms or have to turn to alternative
accommodation providers. Source: STB
6
COLLIERS INSIGHTS HOTELS | ASIA | Q2 2019
Going forward, as tourist arrivals increase, and given a positive economic
and geo‐political outlook, we expect room occupancy to continue to grow
slightly in 2019 and beyond. In addition, given the already high room
occupancy levels, and the continued low levels of new supply anticipated,
hoteliers can be expected to drive room rates even higher. This would
ultimately result in year‐on‐year income growth over the coming years.
However, much of this will depend on the global economic outlook, and
the fallout from the trade disputes between the US and the rest of the
World. Indeed, much will also rest on the outcome of the 2020 US
elections.
In our view, Singapore will continue to remain as a global hub, largely
drawing on its largest source markets across the Asia Pacific region. The
planned new attractions and infrastructure projects scheduled between
2020 and 2030 bodes well for future visitation and combined with the
relatively low level of new room supply, we consider this should continue
to underpin hotel fundamentals over the medium term. In addition, the
Singapore government constantly monitors land use to ensure there is
minimal demand/supply imbalance.
As such, given this background, recent and anticipated trends, we expect
overnight stays to continue to outstrip hotel room stock, as is evident in
previous years. This therefore bodes well for any planned new hotel supply
over this period.
Final thoughts – capital values
Given the government’s recent announcement of the hike in development
charges, we expect this to put a dampener on hotel development projects.
This, combined with the already high land costs, is therefore likely to put
off any new development and refocus capital on existing projects or those
properties that can be easily converted to hotel use within the existing plot
ratio. As such, we expect this to continue to fuel interest in existing
properties, with the hunt for yield giving away to long term capital
appreciation for investors in the city state. REITs’ anyone?
7
COLLIERS INSIGHTS HOTELS | ASIA | Q2 2019
DESTINATIONS OF THE QUARTER
Kuala Lumpur
A storm in a teacup
Being amongst the fastest growing metropolitan regions in Southeast Asia,
Kuala Lumpur holds firm as the national capital and largest city in Malaysia.
According to the Department of Statistics Malaysia, from 2010 to 2017 (latest
available statistics), Kuala Lumpur registered a Compound Annual Growth
Rate (CAGR) of 7.7% in real Gross Domestic Product (GDP) growth, higher
than most cities in the region. This was primarily backed by strong growth in
the construction and services sector, which contributed 12.8% and 6.6% to
the city’s GDP growth respectively. Although growth is holding up, albeit at a
slightly slower pace than before, in the short term, any geo‐political risk such
as potential risk of trade war, slowdown in overseas remittances, and
fluctuations in the exchange rate in key source markets will affect the
country’s economic growth.
Kuala Lumpur is currently the 7th most visited city in the world, and the 3rd
most visited city in South‐East Asia after Bangkok and Singapore. The city has
recorded 12.58 million international visitors in 2017, which saw an 11.5% point as compared to the previous year. This further proves that tourism
increase in tourist numbers as compared to 2016. Although growth in tourism plays an integral part in the country’s growth.
arrivals has largely stalled for Malaysia overall according to the latest statistics
Kuala Lumpur is mainly seen as a corporate and a Meetings, Incentives,
by Tourism Malaysia, KL witnessed a 7.1% growth largely underpinned by a
Conference and Exhibitions (MICE) hub with leisure demand coming from
strong domestic market with strong growth in the Indonesian, Vietnam, US
regional and domestic visitors travelling to Kuala Lumpur for shopping and
Korean and Middle Eastern markets. Tourism in Kuala Lumpur has been
entertainment. However, whilst foreign visitation to the city is significant,
heavily reliant on several key source markets, namely Singapore, Indonesia,
even more so is the size of its domestic tourism market. Domestic tourism
China, Thailand and Brunei. The provision of Mandarin speaking desks, the
dominates hotel market performance in Malaysia accounting for 20.5% of
addition of the Kuala Lumpur‐Frankfurt route and an increase of flight
total arrivals to hotels in 2017 (latest available), of which Kuala Lumpur
frequency from Kuala Lumpur to various Korean cities should boost
accounts for circa 19% of total domestic arrivals. Overall, the city attracted
connectivity and visitations from other source markets. As such, this might
some 17 million visitors in 2016, reversing the downward trend witnessed in
have offset the significant slump in tourists from Singapore, China and Brunei.
2015. In 2017 alone, 19 million domestic visitors were recorded to have
The average length of stay for international visitors in Kuala Lumpur is 5.5 taken trips into Kuala Lumpur, which was an increase of 11.8%.
nights, whereas domestic visitors recorded an average of 2.3 nights.
Staycations are growing in popularity among Malaysians and the nation’s
capital could expect to benefit from promising domestic business. The main
purpose of visiting Kuala Lumpur has been largely leisure, with 71.2% (latest
available) of total visitors taking leisure trips, an increase of 0.5 percentage
8
COLLIERS INSIGHTS HOTELS | ASIA | Q2 2019
Domestic tourism boost with good investment opportunities as supply is being absorbed. However, when the region’s tallest skyscraper
Merdeka PNB 118 completes in 2021, Park Hyatt Hotel will stand to occupy
According to the Malaysia Inbound Tourism Association (MITA), the increase the top floors. 8 Conlay, which will include the world’s tallest spiraled twin
in domestic tourism can be attributed to the weakening of the Ringgit which residential towers will also bring the Kempinski brand into the luxury
has pushed Malaysians to holiday at home. According to Tourism Malaysia, market. Other luxury brands entering the market are in the likes of Jumeirah
the most common reasons for travelling within Malaysia are visiting friends and Sofitel SO, whilst Singaporean property developer Oxley Holdings is set
and relatives (43.6%) closely followed by shopping (33.1%). to bring another set of towers in 2023, just nearby the famed Petronas
Towers.
Kuala Lumpur hotel KPIs
The entry of such luxury brands will be a disruptor to the market,
suppressing ADR of the overall market. Occupancy levels will also face
ADR (MYR) RevPAR (MYR) Room occupancy (%)
downward pressure over the short to medium term but as the pipeline
400 72
increases; we would therefore expect hoteliers to offer discounts to boost
350 70 room occupancy levels. While the outlook for upscale and above segments
300 68 looks optimistic, the 3‐star category and below face pressure in terms of
250
66 occupancy and room rates due to rising competition from home‐sharing
200
64 facilities such as Airbnb.
150
100 62 In terms of hotel transactions, recent deals include the 418‐key Royale
50 60 Chulan Bukit Bintang Hotel sold at RM197 million (RM471,292 per key) in
0 58 March 2019 and the 265‐room Hilton Garden Inn Kuala Lumpur Hotel sold
2015 2016 2017 2018 Jan 2018 Jan 2019 by Singapore’s Royal Group in August 2018 with a transacted volume of
YTD YTD RM240 million (RM905,660 per key). Another notable though related
transaction was the sale of the Majestic Hotel Kuala Lumpur in May 2017 for
Source: STR
RM380 million (RM1,266,667 per key) by YTL Corp Bhd to YTL Hospitality
REIT.
Kuala Lumpur’s hotel occupancy was on an increasing trend from 2015 to
2017, recording a CAGR of 2.3% over the period. ADR, on the other hand Overall, hotel investment in Kuala Lumpur is likely to be driven by HNWIs
registered a slight drop of 0.6%, giving an overall increase in RevPAR of 6.5%. from Malaysia, the Middle East and Hong Kong looking for a primary
This was underpinned by an increase in tourist arrivals into the city, especially residence or trophy assets. Buyers from China, Indonesia and Taiwan are
Mainland Chinese which saw a growth of 7.4% in 2017. also looking for investment opportunities, although there continues to be
concern over China’s restrictive policy for outward investment and the
However, occupancy and ADR declined circa 3.3 percentage points and 3.5%
country’s political aims. This remains a volatile challenge for developers of
respectively in 2018, resulting in RevPAR dropping by circa 6.6%. This impact
mega‐projects who expect to tap into this market. Nevertheless, the market
can be attributed to the increasing supply of branded upper upscale and
volume of mainland Chinese buyers looking to invest in rental properties is
luxury hotels in the market, adding 1,313 rooms into the sector in 2017
expected to remain active, with fully‐furnished units preferred by foreign
alone. From 2018 to 2022, approximately 3,795 new rooms (17 hotels) will
buyers who focus on recurring rental yields. In view of the slowdown in the
enter the market, with 85% of rooms categorised in the luxury segment.
residential property market and the challenging office and retail sectors that
Over the short to medium term, Kuala Lumpur will have to manage their are being swarmed by oversupply, the hotels sector in Kuala Lumpur may
demand and supply disparity, with ADR growth rates expected to remain low then present itself as a more viable investment option.
9COLLIERS INSIGHTS HOTELS | ASIA | Q2 2019
HOTEL INVESTMENT AND VALUATION
Capital markets insights Recent notable transactions
After a strong 2016 and 2017, which witnessed a number of high profile In this quarter, most of the transactions across Asia were in gateway cities,
transactions, the dearth of supply has meant that the 2018 transaction where investors remain very active.
market was relatively subdued in comparison. Investment in the sector is
expected to come in more than 25% down on 2017, as Chinese capital and
pricing levels deterred investors. Hotel Location Value per room (USD)
In 2019, this trend has continued, as owners consolidate their portfolios and 300 million
Six Senses Hotels Resorts Spas Global
seek opportunistic investments as the bid‐ask gap remains at historically (Equity deal)
high levels. Indeed, attention will continue to swing towards more
acceptance of development risk as valuations remain high, and investors 2 billion
Citizen M Global
seek higher returns. (Equity deal)
Interestingly, as the market seeks returns, investors are turning to REIT’s,
and purchasing equity stakes in hotel operating companies. We have seen Hilton Tokyo Odaiba Tokyo 1.2 million
GIC taking a strategic stake in the budget lifestyle hotel operator Citizen M,
and IHG following Accor and Marriott in ramping up their luxury offering
through the acquisition of Six Senses. Royale Chulan Bukit Bintang Hotel Kuala Lumpur 0.1 million
We expect further consolidation and strategic investments to be the theme
for 2019. This will be supported by assets being injected into REITs, and even Source: Colliers Research.
Note: USD conversions are at time of transaction and represent approx. values.
consolidation of REITs to take advantage of high valuations.
Overall, despite strong demand driven by both family offices and private
equity with Asian real estate mandates, quality inventory remains scarce and
thus investors with disposition scenarios in the next 12 months, should
consider expediting their process in order to take advantage of favourable
market conditions, especially as the outlook for increases in interest rates
remains high.
Continuous investment into asset class by institutional investors and the
dearth of assets being sold show that yields have been low and are expected
to remain low, at least until interest rates increase significantly. In addition,
sites that have potential alternative use will continue to depress yields
derived on hotel income.
10COLLIERS INSIGHTS HOTELS | ASIA | Q2 2019
GAMING UPDATE
Update on Asian gaming market
2018 was a strong year for casinos across Asia. From Macau to Cambodia,
operators boasted strong gross gaming revenues (GGR) as the market
recovered from its slump. Whilst VIP revenues have continued to witness a
significant drop especially in Macau, mass market play continues to gain
ground, with 2018 gross gaming revenue increasing by 14%, recording the
second consecutive year of gain as demand from the Mainland Chinese
continued to rebound after a prolonged slump.
The big winner of the continued VIP fallout from the mature destinations
appears to be mainly benefitting those in emerging markets with Cambodia
largely benefitting from the fall out in Macau. NagaCorp, Cambodia’s largest
casino in Phnom Penh, witnessing a whopping 54% increase in GGR for 2018,
when compared to the previous year with the recently opened Naga 2
contributing to this result.
The Philippines also witnessed a strong 23% increase in GGR in 2018, most
of which were generated by the four integrated resorts in Manila’s In our estimation, the size of the Asian gaming market, which remains
Entertainment City. directly correlated with GDP growth in Asian source markets (0.91
correlation factor over last five years), is likely to slow in the short to
Gaming revenues in Vietnam are likely to have grown as well, albeit at a
medium term. We estimate that after a period when there was significant
slower pace. The destination continues to suffer from poorly located
latent demand for gaming in the region, supply has now caught up, and the
properties, visa restrictions, in addition to a very opaque and fragmented
sector is relatively mature. As such, any new supply will have to be
market. We note that the first casino to allow locals is expected to open in
competitive and offer a unique product that can capture demand from other
2019 with this potentially paving the way for others casinos?
established destinations in the short to medium term.
It is debatable how much additional GGR this could generate or would it
Our estimate of total potential GGR in 2019 is circa US$91.7 billion, with this
simply cannibilise demand from existing border casinos?
mostly driven by the traditional mature destinations of Macau and
Asian gaming has and continues to shift rapidly to new norms. Previous Singapore. Going forward, with the recent announcement of the integrated
levels of frustrated and latent demand are being quickly absorbed as new resort expansion in Singapore, and the impending concession review in
supply enters the market, and as governments across Asia realise they are Macau, this is likely to increase the competitive market in the medium to
leaving money on the table (or giving it away in some cases) by not long term, with these established markets potentially increasing market
penetrating the gaming market, regulating and taxing it at the right levels. share. This poses an interesting dilemma for properties in Japan.
This, combined with slowing growth in demand, has meant that investors
are no longer witnessing the eye watering returns as with previous
investments and must be more discerning.
11COLLIERS INSIGHTS HOTELS | ASIA | Q2 2019
Relationship between GDP and gaming revenue
2015 2016 2017 2018 2019F 2020F 2021F 2022F 2023F 2024F
GDP Asia Pac (US$bn) 22,669.7 23,712.0 25,272.2 27,105.4 28,654.6 30,949.0 33,359.4 35,909.2 38,652.8 41,595.7
Potential GGR Asia (US$bn) 79.3 83.0 83.4 89.4 91.7 95.9 103.4 111.3 119.8 128.9
GGR as % of GDP 0.35% 0.35% 0.33% 0.33% 0.32% 0.31% 0.31% 0.31% 0.31% 0.31%
Source: IMF WEO April 2019 and Colliers estimates
An increasingly crowded market Gaming is a key driver for international visitation in the region, and if done
correctly can add value to local economies, whether it be from income tax
The announcement that Japan will be legalising gaming in 2016 did not have contributions, or job creation, and the multiplier effect that can have. As
any impact at the operational level of existing properties, but it has impacted such, the feasibility and economic impact of new developments must be
decision making in terms of capital outlay strategy with some operators fully assessed especially as the market becomes more crowded and total
putting off large scale investments in existing properties. Given any IR potential GGR slows.
development in Japan will only likely evolve beyond 2023, with the
government, quite rightly, signaling a cautious approach in the likely number The recent announcement of the expansion of the IRs in Singapore, which
of licences (circa three is expected) to be granted in the first round, we could potentially coincide with Japan’s first openings, together with
believe Japan IR’s have the ability to be truly iconic and unique, largely NagaWord’s third complex in Phnom Penh, suggest the gaming market is set
tapping into the north Asia and domestic markets, with a potential market for challenging times ahead, especially given a potential slow down in the
share certainly larger than Singapore’s. growth of gaming revenue.
As such, we anticipate that the total potential GGR for Japan in 2023 to be
circa US$17 billion, taking into account an anticipated ‘novelty’ effect in the
first year of operation. This could fall to US$12 billion in year two, stabilising
around this figure. We note that this represents total potential GGR. Should
only say three licences be granted, depending on location, the fair share of
each metropolitan property could therefore be circa US$4.5 billion to US$6.0
billion per annum, stabilised. We would expect, operators in so called tier 2
locations to generate significantly less in GGR per annum.
12COLLIERS INSIGHTS HOTELS | ASIA | Q2 2019
ABOUT COLLIERS HOTELS
Colliers International launched its specialised hotels division in 1985.
Our dedicated hotel specialists are based in Australia, Hong Kong,
Singapore, Tokyo, London, Nairobi, Dubai, Boston and Los Angeles.
Whether you are a start‐up or well‐established We provide timely, relevant and forward‐looking NEXT QUARTER
owner, developer or investor, we will help you advice. This global division has exceptional
go through the business life cycle by providing relationships with investors worldwide, required
specialised, value‐added advices that are tailor‐ for the timely and effective sale of assets.
made to your specific needs:
Our specialised sector expertise includes:
OPINION
> Market and feasibility studies MICE in Asia
> Hotels and resorts
> Property and business valuation
> Theme parks
> Capital markets
> Travel trade
> Internal business reviews
> Golf DESTINATION OF THE QUARTER
> Operator search and selection
> Spas and wellness facilities > Phuket
> Due diligence
> Casinos > Okinawa
> Transaction advisory, IPO and REITs listing
> Conference and convention centers
> Management agreements and lease reviews (MICE venues)
> Extensions, refurbishments > Racecourses
> Benchmarking and forecasting > Sports stadiums GOLF UPDATE
> Tourism strategy and master planning > Integrated and mixed‐use
> Asset management > Destination consulting
> Needs analysis / economic impact studies
> Litigation support and dispute resolution
> Business restructuring – OpCo / PropCo
> Highest and best use / concept designs
> Project management and leasing
13Primary Authors: Govinda Singh Executive Director | Valuation & Advisory | Asia +65 6531 8566 Govinda.Singh@colliers.com Destination Consulting: Chris Wright Director | Valuation & Advisory | Asia +852 2822 0719 Chris.Wright@colliers.com Regional Contact: David Faulkner Managing Director | Valuation & Advisory | Asia +852 2822 0525 David.Faulkner@colliers.com About Colliers International Group Inc. Colliers International (NASDAQ, TSX: CIGI) is a leading global real estate services and investment management company. With operations in 68 countries, our 14,000 enterprising people work collaboratively to provide expert advice and services to maximize the value of property for real estate occupiers, owners and investors. For more than 20 years, our experienced leadership team, owning more than 40% of our equity, have delivered industry‐leading investment returns for shareholders. In 2018, corporate revenues were $2.8 billion ($3.3 billion including affiliates), with more than $26 billion of assets under management. For the latest news from Colliers, visit our website or follow us on Copyright © 2019 Colliers International The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.
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