Asia puts growth on hold as demand falls

MOST new hotel projects in Asia have been cancelled or postponed because the region has too many hotel bedrooms and not enough visitors, a new report has found.

According to the second edition of the Asia Hotel Property Digest from property agent Jones Lang LaSalle Hotels, demand for hotel rooms has not kept pace with the rapid expansion of tourist accommodation.

Room rates are expected to fall this year as a result.

Overall occupancy in Asian hotels has fallen year-on-year since 1994, and the rate of decline accelerated during 1997 and 1998 as the Asian economic crisis took its toll.

Of the 10 major cities analysed in detail, only Mumbai (Bombay) in India recorded a growth in revenue per available room (revpar) between 1996 and 1998.

The other nine major markets each saw falls in revpar, ranging from a 12% drop in Phuket, Thailand, to a 45% slump in Jakarta, Indonesia.

Hotel values have also dropped since 1996, particularly in Hong Kong, Kuala Lumpur, Shanghai and Jakarta. Many new hotels have been built in all of these cities.

The report adds: "The outlook for Asia's hotel market remains cautious. Oversupply in most of the markets will compound the effects of a contraction in demand and, as such, average occupancy in most cities is expected to exhibit a further downward trend. Room rates will come under intense pressure."

It concludes: "Asia is unlikely to return to its historical levels of profitability for some time."

by Louise Bozec