GlobalHotelNetwork.com: Where do you see the best opportunities for hotel investment or development?
Robert McIntosh: The appetite for hotel investment or development varies by the requirements of the individuals and the sources of capital. There are some mega trends in Asia Pacific however that are having serious impacts. These include the difficulty that many mature markets have in increasing room rates for the last few years, particularly Hong Kong and Singapore, the reduction in yields and changes in supply. For those who like strong, stable and internationally attractive markets, initial yields can be as low as 3% in Singapore and Hong Kong. However obtaining properties to purchase or develop is very difficult.
Tokyo, and other markets in Japan, are generating attractive returns on equity given the low borrowing costs and the very strong rise in international visitors. Development there is now increasingly challenging.
China is still growing in terms of supply and there are opportunities where there is an imbalance between demand and the new additions. In the longer-term China will need many more rooms but some cities may still have volatile performance in the short term.
Vietnam has had an extraordinary increase in hotel rooms, but this has been less pronounced in the two main cities of Hanoi and Ho Chi Minh City. Development there has slowed or stopped at present but will come back strongly.
Thailand had many varied opportunities and continues to be on of the top worldwide destinations. Returns for investors are attractive. Indonesia continues to be a development opportunity as does the Philippines. There are some good local operators and scale is being chased by rapid expansion which may lead to some takeover and merger prospects. The Pacific has had a very good run for the last few years, but supply has been a challenge in markets like Perth and Brisbane. These are now countercyclical in investment terms. Melbourne and Sydney on the other hand have yet to see the peak increases in rooms although the former is holding up well. New Zealand continues to be a strong market with limited supply. The rapid increases in RevPAR have been partly reversed this year but locations like Queenstown continue to be very attractive to international visors.