Headwinds

  1. Recovery in airline capacity to remain slow

    While most airlines in Asia Pacific have registered an increase in passenger load factor compared to 2019 levels, airline capacity is still yet to see a full recovery due to a lack of staff and aircraft. However, CBRE forecasts that total international tourism arrivals should reach 2019 levels by the end of 2024.

  2. Gradual return of mainland Chinese tourists

    Mainland Chinese tourists have been hesitant to travel abroad in the first 12 months following the border reopening. Whilst a pickup in outbound tourism is expected as economic headwinds subside, a full return of mainland Chinese tourists to pre-pandemic levels may not occur until 2025.

Recovery

  1. RevPAR to be driven by occupancy recovery

    Expectations are that whilst ADRs should generally normalise in most markets, occupancy growth in well-managed assets should drive revenue growth. Operators that demonstrate flexibility and capitalise on the upswing in tourism will be the main beneficiaries, particularly those in North Asian markets such as Japan and Korea.


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Strong demand for international travel but airline capacity continues to lag

The staggered re-opening of Asia Pacific markets’ borders, combined with shortages of planes and crew, has seen airlines in the region continue to operate below pre-pandemic capacity.

According to the Official Airline Guide (OAG)2, total available aircraft seats (when comparing December 2019 to December 2023) remain at a deficit in Asia Pacific due to airlines’ inability to bring back staff as well as a shortage of aircraft for both domestic and international flights.

However, when comparing the performance of major airlines in Asia Pacific in H1 2019 and H1 2023, most airlines have registered an increase in passenger load factor. Overall load factor in Asia Pacific has risen by 6.7% y-o-y so far this year and is above what was measured in 2019.

Although further growth in international travel is expected over the next 12 months, the challenging economic environment could weigh on the recovery. Persistently high inflation has exerted pressure on transport and accommodation costs for tourists. Slower economic growth typically correlates with a slowdown in international departures, meaning that markets that are slated to experience below trend growth will most likely see international departures lose momentum over the next six months.

Despite this, air passenger forecasts in the region are positive. According to the International Air Transport Association’s (IATA) December 2023 forecast3, passenger throughflow for airports in Asia Pacific is set to surpass 2019 levels during 2024, with growth in air passengers to be more positive in Asia Pacific than what is expected in both Europe and North America.

Figure 17: Total available aircraft seats by key markets (Dec-19 vs Dec-23)

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Source: IATA, OAG, CBRE Research January 2024

(Click to enlarge)


Figure 18: Airport throughflow by region (by year) as a % of 2019 levels

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Source: IATA, CBRE Research January 2024

(Click to enlarge)

With ADRs having stabilised, growth will come through occupancy

A rise in international arrivals from key markets, particularly Japan and mainland China, pushed up Asia Pacific hotel room rates in 2023, ensuring a continuation of the upbeat mood among hotel operators witnessed last year.

After enjoying demand-driven growth in 2022 as borders re-opened, ADR growth in 2023 was driven by hotel owners’ need to offset rising operational costs alongside operators’ preference to drive ADR to mitigate inflation. 

Demand-based pricing has allowed operators to use ADR to combat rising inflation across the region, with the flexibility of changing rates enabling hotel owners to respond more swiftly to counteract the increase in underlying operating costs and mitigate the impact of inflation.

This flexibility in ADR change can also be attributed to the increased market share of FIT/transient occupants, with corporate group stays usually incorporated at a fixed cost and less influenced by shifts in the daily rate.

Expectations are that whilst ADRs should generally normalise in most markets, occupancy growth in well-managed assets should drive revenue growth. Operators that demonstrate flexibility and capitalise on the upswing in tourism will be the main beneficiaries, particularly those in north Asian markets such as Japan and Korea. Whilst ADRs in Hong Kong SAR have recovered to pre-pandemic levels, occupancy continues to lag as non-mainland Chinese visitors have yet to return to the city in full force.

Figure 19: RevPAR & ADR in major Asia Pacific markets (Full year 2019 vs Full year 2023)

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Source: STR, CBRE Research, January 2024.

(Click to enlarge)



OAG Airline Frequency and Capacity Trend Statistics Report: November 2023
IATA Global Outlook for Air Transport: December 2023

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