HICAP returns to Hong Kong; leaders weigh in

HONG KONG - The BHN Group brought back hotel investment conferences to Hong Kong for the first time since 2019, hosting HICAP Update on March 13-14 at The Regent Hong Kong.

Among the high-profile sessions where panelists shared where their optimism lies was “Views from the Boardroom, Round One,” moderated by Matt Gebbie, director, Asia Pacific, for Horwath HTL.

With a promise of no talk about Taylor Swift and no self-promotion, Gebbie first asked the panelist about their performance outlooks and development focuses, starting with Jihong He, chief strategy officer, H World Group Limited, Shanghai.

Family and friends are coming together, interested in investing and starting in limited-service hotels. High-speed rail going to every village helps, creating new potential demand.

Jihong He

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Jihong said 2023 was a very strong recovery year in China, where 9,000 hotels account for 80% of the company’s revenue. With the trend still pointing up, the average RevPAR for 2023 beat 2019 by 20%, driven by ADR gains because occupancy was not quite back to previous highs (81% in 2023 v 85% in 2019).

Jihong add that there is increasingly strong demand from lower tier cities in China. In fact, she said they were surprised by local activity and demand in cities that previously never saw a chain hotel. “Locals want to experience chain hotels,” she explained.

She also pointed to strong interest for development from franchisees in third- and fourth-tier cities. “Family and friends are coming together, interested in investing and starting in limited-service hotels” she said. “High-speed rail going to every village helps, creating new potential demand.”

Looking ahead, Jihong expects continued strong demand and rate but warned about being careful with rate growth in limited-service hotels to avoid curtailing demand. She also believes limited-service is still the biggest growth opportunity and added that upper-upscale development is a coming trend.

Dillip Rajakarier, CEO, Minor Hotels and Group CEO, Minor International, said he is waiting for more inbound traffic to Asia Pacific, adding that China remains mostly a domestic market.

More generally, he said Asia is performing very strong this year with continued softness in outbound Chinese travel. “Japanese, Saudis, Indians and Europeans are making up for the shortfall of outbound Chinese travelers,” he added.

You can get a non-recourse loan for 0.55% [in Japan]. Even if you get a property yielding 4.5%, you still have a spread of 4%, which is really decent.

Peng Sum Choe

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Rajakarier is very bullish on Minor’s Europe business and growth as constrained air travel is still leading to more regional and short haul trips.

Within Asia Pacific, he said traffic remains more regional due to the lack of outbound Chinese travel, adding that Saudis are traveling a lot more in Asia Pacific.

Peng Sum Choe, CEO of the Pan Pacific Hotels Group said he is excited by the development prospects in Japan and Jakarta – Japan because of the dip in the value of the yen and remaining low interest rates. “Tourism is strong and which country can you find interest rate so low?” he said. “You can get a non-recourse loan for 0.55%. Even if you get a property yielding 4.5%, you still have a spread of 4%, which is really decent. Conversely, a hotel in Sydney is yielding 6.5% to 7% but preferential interest is at 5.5%.”

Peng Sum added that Jakarta is growing, and he sees occupancy stabilizing. “It’s the best kept secret market and we want to get in there,” he said.

Daniel Aylmer, managing director and senior vice president of Greater China for IHG Hotels & Resorts, said China is performing very well and he is not sure if it is a result of revenge spending. “The challenge is Tier 1 cities are not back anywhere near where we want them to be,” he said. “Long haul is not there yet as it’s quite costly for U.S. and European travelers. Inbound travel, corporate and MICE to Tier 1 cities are key for RevPAR growth.”

Domestically, China is showing tremendous demand, Aylmer added. “We are confident and bullish in Greater China due to the economic system that makes sense, population growth, the markets, the opportunities, and under penetration of brands,” he said. “It is different than it was in 2018 with consumer, owners, markets – but there is so much opportunity there.”