There was a lot of movement in the hotel space in Asia Pacific in 2015, and given the dynamism of the region and the changing realities of each market, 2016 is likely to be busy as well. Many of the themes that dominated much of the investment in the space in the past year will continue to influence the environment over the next 12 months.
And three of the big themes of the past year likely to influence investments going forward are a looming Asian currency war, changes in economic growth in China and the rise of the ASEAN Economic Community.
The Looming Asian Currency War
In November, just days before the Chinese renminbi got the green light to join the International Monetary Fund’s elite currency club, known as the Special Drawing Rights basket, China’s central bank made a technical announcement. The People’s Bank of China (PBOC) will move away from determining the renminbi’s value via using its exchange rate with the US dollar, in favor of a valuation against a basket of 13 currencies.
The move has fueled speculation that China is preparing to let the renminbi slide 10 percent or more against the greenback in the coming year.
If the renminbi weakens significantly, don’t be surprised to see central bankers in Tokyo, Hanoi, Taipei, Kuala Lumpur and Jakarta devalue their currencies to remain competitive, which would have an impact on intra-regional capital flows.
The weak Malaysian ringgit and Thai baht have already spurred significant outbound investment by Malaysia- and Thailand-based hotel investors, with the weakening of the Chinese renminbi driving transaction volume by China-based investors, a trend that looks set to intensify in the coming year.
The China Factor
China continued to be the most important outbound travel market in Asia, buoying hotel business across the region.
In 2015, China also enjoyed a booming domestic tourism market, especially in top-tier and fringe markets, while seeing major consolidation among owner-operators and even booking platforms. The Jin Jiang-Plateno and BTG-Homeinns deals were among the bigger ones announced in 2015, and their impact will continue to ripple through the market in the coming year. The massive deal that brought online travel agents Ctrip, eLong and Qunar under the same umbrella appears to have ended the price wars that characterized the market prior to the megamerger.
Outbound hotel investment by Chinese companies and individuals picked up in 2015, although in global terms, mainland Chinese and Hong Kong-based companies including HK CTS Metropark and Jin Jiang were making major international acquisitions in Europe while closer to home, Chinese investment poured into Australia and New Zealand.
Another major development that shaped the past year for China’s hotel sector was the continued push by Chinese property companies into the domestic hotel market, first through cooperation with hotel operators, now increasingly with standalone brands.
Expect to see Dalian Wanda, a major real estate company, and others strengthen their hotel brands in China in 2016.
The 10 countries of the Association of Southeast Asian Nations (ASEAN) continued to receive growing numbers of Chinese travelers in 2015, but the big story was the growing amount of travel within and among ASEAN’s members.
Taken as a whole, the bloc is home to more than 600 billion people with combined GDP of around US$3.2 trillion. Countries with stronger economies at the moment, including Vietnam, Indonesia and the Philippines, registered strong economic growth this year, and their growing middle classes are were using their rising disposable income for domestic or regional travel at previously unseen levels. Frontier markets including Myanmar, Laos and especially Cambodia continued to join the regional tourism landscape with the opening of new roads, airports and hotels.
Industry players across ASEAN made efforts in 2015 to prepare for the December 31 launch of the ASEAN Economic Community (AEC), removing barriers on the flow of people, goods and capital across the block.
The impact of the new AEC is unlikely to be significant in 2016, but it will gradually have major ramifications for hotels in the region, from staffing to overall regional business strategies by major brands.