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Hotels versus shared accommodation

 

  By Virginia Ewart-James

As tourism in Asia Pacific continues to flourish, hotels need to adapt to changing consumer preferences. 

Tourism plays an important role in the Asia Pacific region. For many countries it is the leading revenue generator as Asia is a popular destination for holidaymakers across the globe thanks to its climate, diverse offerings and it’s relatively low cost. In fact the United Nations World Tourism Organisation state that by 2020 the annual figure fo4 international tourists arriving in the area will reach 355 million.

Intra-regional tourism is also on the up. Real estate firm CBRE predicts that intra-regional tourism within Asia Pacific is forecast to reach 286.3 million trips by 2020. Thanks to a growing middle class with more disposable incomes, more people are travelling than ever before.

The rise in the number of Chinese tourists travelling has been very topical of late as 2016 saw a 10 percent year-on-year increase on outbound tourists to 128 million. Whilst Chinese spending grew by 26 percent for the same period to USD 292 billion. This trend is not expected to slow down, and excluding Hong Kong, Thailand continues to be Chinese tourists number one destination as visa policies have been relaxed.

James Pitchon, head of research and consulting at CBRE Thailand comments, “In H1 2016, Chinese arrivals have continued to be Thailand’s largest feeder market making up 30 percent of tourist arrivals to Thailand. This has led to hotel performance being driven mainly by strong Chinese arrivals, However most Chinese tourists spend the vast majority of their money on shopping rather than on accommodation. Choosing low cost options, the hotel sector does not always benefit from their spending power. The demand for hotels will of course grow but there has also been a rise in the option for shared accommodation. Platforms such as Airbnb that has over two million rooms or properties to rent in over 191 countries have become a useful tool for travellers. Offering daily rates cheaper than that of hotels, they often include amenities such as washing machines. Similar online portals exist in the region including Tujia in China and Homie and Singapore.

“Short-term rentals are increasingly used as a substitute for hotel rooms. At the same time, the growth of shared accommodation is posing a major challenge to the traditional hotel industry. The ability to offer consumers lower prices and a unique experience in often unconventional accommodation is prompting traditional hotel operators to rethink their operating models,” comments Ada Choi, senior director of research, CBRE Asia Pacific.

Hotels will need to adapt to this change in consumer preferences. Robert McIntosh, executive director at CBRE Hotels, Asia Pacific comments, “The growth of shared accommodation does pose a longer-term challenge for the hotel industry, especially during peak seasons, and this trend has prompted hotel operators to review their operational models. Several multi-brand hotel chains have responded by expanding their portfolios to the affordable segment with younger travelers in mind. These hotels have utilised innovations such as mobile check-in services and more open spaces and common areas for guests to socialise with each other, all at a lower price point”.

The outlook for the tourism sector remains rosy. However it will be interesting to see how the hotel sector responds to the changing trends of travellers.