Apac Hotels Continue Attract Investments Supported Resilient Hotel Performance Colliers
Rewritten:
The Asia Pacific (Apac) hospitality industry has made a remarkable recovery in recent years following the Covid-19 pandemic. However, as we approach 2025, the sector’s rapid momentum is shifting towards a more steady pace as it transitions from recovery to stabilization, as stated by real estate consultancy Colliers.
According to Govinda Singh, Colliers’ executive director for Apac capital markets, hotels and hospitality, and advisory, the narrative is changing from recovery to a new norm as high-performing markets begin to stabilize.
As this transition takes place, there has been a decrease in hotel investment activity at the beginning of this year. In their Asia Pacific Hospitality Insights May 2025 report, Colliers reveals that Apac hotel investment volume fell by 19% year-on-year to US$2.1 billion ($2.71 billion) in the first quarter of 2025. This can be attributed to a rise in Apac hotel investment yields for the second consecutive quarter, reaching an average of 5.4% in the last quarter.
Despite this, investors continue to show interest in hospitality properties in highly liquid markets such as Japan, South Korea, and Australia, which saw the most activity in the first quarter of 2025, according to Colliers. Additionally, Singapore remains an attractive destination for generational wealth investment.
Singh explains that the decline in hospitality real estate deals is not surprising, as the first quarter is typically a slow period for transactions. Furthermore, geopolitical uncertainty may have also played a role in investors taking a cautious “wait-and-see” approach.
However, instead of backing down, Singh believes that investors are adjusting their strategies. He notes that with stable pricing, investors are shifting their focus from cap rate compression to value-add strategies that prioritize cash flow and income growth to generate returns. He predicts an increase in hotel deal activity for the rest of the year as market conditions stabilize and the need to deploy capital intensifies.
Colliers’ positive outlook for the hospitality sector is backed by its resilient performance in the first quarter of 2025. The report cites data from CoStar, a US real estate data and analytics firm, showing a 2.1% year-on-year increase in revenue per available room (RevPAR) across Apac in the first quarter, compared to 0.4% growth the previous year.
This growth in RevPAR was mainly driven by an upsurge in average daily room rates (ADR), which rose by 3.3% year-on-year to US$92 in the first quarter. Notably, Thailand and Japan contributed the most to ADR gains, with increases of 14.7% and 11.9%, respectively, reaching US$154 and US$127. In contrast, traditional high-value markets like Singapore and Hong Kong experienced a decline in rates in the first quarter, with ADR decreasing by 5% to US$232 in Singapore and 3.8% to US$171 in Hong Kong. This reflects a shift in pricing dynamics as established destinations adapt to changing travel patterns and guest expectations, the report explains.
However, despite the ADR playing a crucial role in RevPAR growth in the first quarter, the momentum for rates is slowing down. As per Singh, the next phase of growth in the hotel sector will depend on driving occupancy, operational efficiency, and guest experience. This is especially true as supply remains limited due to high construction costs.
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Leading the way in these aspects are destinations like Phuket, Tokyo, New Delhi, Mumbai, and Osaka, all of which saw significant ADR growth in the last quarter. This can be attributed to strong domestic demand, an increase in international travel, and effective market positioning. Singh states that these markets exemplify a rate-driven performance strategy and set the benchmark for value-oriented expansion in the Apac hospitality sector.
The report also notes that countries that were previously reliant on Chinese tourists are now targeting the growing number of Indian travelers. Singh explains that with the rapid expansion of India’s middle and upper classes, Indian tourists are not only spending more per stay but also seeking experiential travel. As a result, they have become a steady and reliable source market throughout the year.