China leads all-time-high APAC pipeline

Lodging Econometrics turns its attention to Asia-Pacific, where the pipeline is at a record level, with China leading the pack of new projects.

At Q3 2013, the Asia-Pacific construction pipeline reached a record-high 2,494 projects/584,554 rooms. It’s a 6-percent increase by projects, and 4 percent by rooms, year-over-year (YoY). Pipeline totals have been trending upward for 15 quarters from a shallow bottom established in Q4 2009. Three countries—China, India and Indonesia—make up 90 percent of all projects in the Asia-Pacific pipeline. Even after a brief mid-year economic slow down in the region, growth has continued its upward trend and by far remains the top targeted region for global franchise companies.

China dominates the Asia-Pacific pipeline with 1,695 projects/435,006 rooms. It has the largest pipeline in the world as measured by rooms and is second to the U.S. in project counts. Of the 25 markets with the largest pipelines in the region, 20 are located in China. China represents 68 percent of all projects and 74 percent of rooms in the Asia-Pacific region.

China’s total pipeline has been trending upward for 17 quarters and is at a new peak, despite a minor economic slowdown, which caused some tapering of new project announcements into the pipeline. Development is so strong that in some cities, such as Hong Kong, there are concerns that future supply coming online might cause a prolonged glut of guestrooms.

Six of the top seven cities in the region with the largest pipelines are located in China. Chengdu in the industrial heartland has the most rooms at 17,619. Shanghai has the most projects with 91, followed by Hong Kong with 73.

India’s pipeline, the second largest in the region, has been trending downward since it peaked in Q4 2010. It now stands at 335 projects/56,276 rooms. India’s economy has been cooling for some time. Its pipeline has dropped from third to fourth largest in the world, recently surpassed by Brazil whose pipeline has exploded.

Brought about by recent statewide elections that could signal a fruitful change in the national government, there have been signs of an economic resurgence in India in the last year. The rupee has gained strength, the stock market has risen strongly and there are signs of foreign investment returning. Hopes are high that political change will also make it considerably easier to conduct business in India.

Indonesia is the world’s 16th largest economy, but has the fifth largest pipeline in the world. The pipeline stands at 203 projects/33,021 rooms. It is the third largest pipeline in the Asia-Pacific region. The city of Jakarta has the third largest pipeline in the Asia-Pacific region and sixth largest globally, with a total of 73 projects/12,615 rooms.

Other countries in Southeast Asia combine to have 261 projects/60,251 rooms in the pipeline, an increase of 4 percent by projects and 1 percent by rooms YoY. Thailand leads with 44 projects, followed by Vietnam with 34, Malaysia with 33 and the Philippines and Singapore with 23 each.

Leading Franchise Companies in the Asia Pacific Pipeline
For over two decades, the Asia-Pacific region has represented enormous potential for global franchise companies, particularly for those with a portfolio of high-end brands.

The three largest global franchise companies have impressive pipelines in the Asia-Pacific region that are second only to their new-construction totals in the U.S.: Hilton Worldwide with 175 projects/53,504 rooms; Marriott International with 172 projects/46,055 rooms; and InterContinental Hotels Group with 117 projects/29,536 rooms.

Starwood Hotels and Resorts Worldwide with 162 projects/46,039 rooms and Hyatt Hotels Corp. with 88 projects/21,752 rooms have totals in Asia Pacific that are actually greater than their new-construction activity in the U.S.

Accor, a European based company with 192 projects/43,110 rooms, has the largest pipeline in the Asia-Pacific region. It has three times as many rooms in its pipeline as it has under development in its home base of Europe.