A growing appetite for travelling and more work-life balance especially of the Millennial Generation, is sparking increasing demand for tourism properties.
Text & Photography by Jan Yong
Anyone who thinks President Donald Trump has cast a dark shadow on the economic well-being of Asians probably has to think twice. Despite the uncertainty created by the ‘Trump Effect’, life goes on. That includes buying real estate and going on holidays. Before Trump’s election victory last November, the statistics on travel were pretty overwhelming. There seems to be a surge in travel and leisure since 2015 with numbers doubling in 2016 year-on-year.
Led by the Chinese Mainlanders (no surprise here), worldwide inbound visitors numbers have reached record levels. According to World Travel Monitor®, outbound travel by Asians grew by a dynamic 11% in the first eight months of 2016, led by Chinese Mainlanders with an 18% rise in outbound trips (excluding to Hong Kong and Macao). This is followed by South Koreans who recorded an 11% rise in international travel.
Over 80% of those trips including for all Asians were for holiday purposes; beach and island destinations were particularly popular which saw growth of 20% between January and August 2016, reports World Travel Monitor. Countryside trips were not far behind, chalking up growth of 15%.
The remarkable boom in Asian outbound travel is also confirmed by figures from the World Tourism Organization (UNWTO) which show strong growth for many destinations in Asia Pacific in 2016. The region is leading worldwide inbound growth, with international tourist arrivals (overnight visitors) up 9% through September 2016 from 6% in 2015, according to the UNWTO World Tourism Barometer.
Many destinations reported double-digit growth, led by Vietnam (+36%), South Korea (+34%), Japan (+24%) and Sri Lanka (+15%). Based on these numbers, the Asian Travel Confidence Index which measures travel intentions for the next year predicts a 6% rise in Asian outbound trips in 2017.
That was before Trump came into power – from hereon, expect things to quieten down marginally. According to JLL’s latest report in January, the outlook is softening but the markets remain liquid because hotel investment markets have reached a plateau in performance.
“Hotel transaction volumes are slated to end 2016 down about 40% from the extraordinary levels posted in 2015. That said, large transactions continue to reach completion and the proportion of cross-border transactions is at an all-time high,” JLL states.
Judging by the numbers, any savvy investor in real estate would know that investing in tourism properties would almost certainly guarantee takers – given enough time. But be forewarned, tourism is only for those with a long-term view because the tourism industry is sensitive to any bad news such as bombings, terrorist attacks, kidnappings, epidemics, protests, visa restrictions, earthquakes, and inclement weather. Why go to Destination A when there are 20 other locations where you can enjoy a similar holiday experience? The choices are aplenty and loyalty is not exactly a strong characteristic of travellers, in general.
Seemingly defying the Trump Effect is Chinese real estate developer Guangzhou R&F Properties which plans to invest USD3 bil within five years to build ‘six-star’ hotels in Phnom Penh and coastal Preah Sihanouk province in Cambodia. The Chinese behemoth has in January partnered with Cambodia’s Royal Group, run by powerful tycoon Kith Meng to undertake these projects.
Despite reservations expressed by some analysts, Cambodia to date has shown remarkable political stability under Prime Minister Hun Sen while economic growth, though not as stellar as some of its neighbours, is still on the uptrend.
Its neighbour, Vietnam, meanwhile, is seeing a rush by developers to build hotels especially on its islands and along its long beautiful coastline. A recent report from Vietnam reveals that despite the low occupancy in some beachside luxury resorts, more and more hotels are springing up everyday.
In the last three years, resort projects have been developed continuously at Phu Quoc, Da Nang, Nha Trang, Hai Phong and Thanh Hoa – areas seen as having great potential for tourism development.
Big developers like Vingroup, Sungroup and FLC have poured trillions of dong into the projects there. Analysts believe several factors have converged to make tourism properties popular apart from the fact that Vietnam is at the forefront of Asian inbound tourism in 2016.
The ready infrastructure, relatively affordable prices (about VND2-3 bil) and lack of popularity of other investment products such as gold, securities and the dollar, have sent rich families from Hanoi and Ho Chi Minh City rushing in to buy. Analysts believe these investors are looking more at selling the property later for double the profit due to land price increase rather than at returns from leasing.
ALLURE OF THE SEA
And the list goes on in other countries in the region. One point that stands out is that the up-and-coming destinations are all either beaches or islands. Bill Barnett, Managing Director of C9 Hotelworks, when asked which are the most sought-after locations for resorts in Asia, listed the following in no particular order – Maldives, Phuket, Bali, Koh Samui, Da Nang, Langkawi, Cebu, Penang, Boracay and Sanya.
Getting another industry expert to name the destinations yielded a similar result – Miles Fenley, Director of Montpelier Estates (Asia Pacific) additionally named Pattaya, Hainan, Okinawa and Jeju – all of which also happen to be beaches or islands.
In a similar vein, according to Barnett, the top five up-and-coming resort destinations in Asia are also all located on islands or beaches – Southern Coast/Greater Galle (Sri Lanka), Phu Quoc, Lombok (Indonesia), Palawan (Philippines) and Southern Cambodia coast and islands.
This trend is consistent with World Travel Monitor’s report which showed a 20% growth in beach and island resort stays for the 1st three quarters of 2016. Quite clearly, for the investor, half the battle is won when you locate your tourism property on an island or at the beach.
“Location is the most decisive criteria – half the battle would have been won – if you get it wrong however, making it successful then would be most challenging,” notes Sr Low Han Hoe, Senior Manager (Investment & Agency) at Nawawi Tie Leung Real Estate Consultants Sdn Bhd.
On the other hand, Barnett is of the view that although location is one very important key factor, “you would still have to look at the numbers as well on investment, and expected returns and risks. Development costs and land prices also factor heavily into the proposition.”
Fenley adds that timing is equally important because sought-after locations may change over time. “Location will affect the choice of design and end product (i.e. star rating, etc) but many other factors also play a part, for example, easy access is imperative to get guests to the resort!”
TRAVEL ADDICTION ON THE RISE
Trailing seaside popularity are countryside, cities and mountains. But that may change in the near future given the increasing appetite of tourists to become independent travellers and explore exotic locations on their own. My recent trip to Iran is a case in point. The travellers I met were mostly well-travelled Millennials in search of exotic adventures in faraway countries. Most have travelled to all the usual tourist hotspots like Japan, Korea, China and Southeast Asia, with some having set foot in up to 60 countries.
These travellers, comprising mostly Malaysians, Singaporeans, Chinese Mainlanders, Hong Kongers, Thais, Vietnamese and Japanese revel in planning their own itinerary as well as the freedom in planning as they go. Most express the desire to visit countries like Armenia, Georgia, Eastern Europe, Middle East, Central Asia and South America in the near future.
Most of them arrived in Tehran from Kuala Lumpur via Air Asia, one of the few Asian airlines that flies to Tehran. This also shows that travellers’ intended holiday destinations are frequently influenced by the airlines’ destinations as well as fares. If Air Asia hadn’t resumed flights to Iran from Kuala Lumpur, there would be fewer people from Asia visiting Iran.
Having spoken to the Chinese travellers in Iran, what I gathered was that the burgeoning middle class in China have just discovered the joys and thrills of traipsing around the world and in no way will that travel addiction diminish due to threats of war (trade or otherwise). Even if the US dollar appreciates significantly, there are still countries where their currency has depreciated to such an extent that, provided your air ticket is cheap and inflation has not crept up to double-digit figures, spending in that country has never been cheaper.
The thirst to travel has never been greater now than at any point of time in history – this is magnified many times over by the increasing numbers who have caught the travel bug especially those from the country with the biggest population on Earth. Whether it is the busy executive on a short break or the backpacker on a longer trip, the trend is here to stay. Almost anyone now can fly, with competitive air fares and frequent promotions being the order of the day. With more travel, more rooms are needed. Clearly, the travel industry has more room to grow. For the long-term investor, it’s something worth noting and cashing in on while the going is good.