ASIA PACIFIC OVERVIEW OPERATIONS REVIEW GROWTH ACROSS MOST ASIA PACIFIC MARKETS AS RECOVERY TOOK HOLD In 2023, Asia Pacific registered 233 million international visitor arrivals, recovering to 65% of pre-pandemic levels, after most destinations fully reopened by late 2022. Performance varied across subregions, with South Asia leading at 87% of pre-pandemic levels. Oceania and Southeast Asia fared similarly, recovering to 74% and 70% of pre-pandemic levels respectively. Northeast Asia lagged at 55%, albeit accelerating more than the others in the second half of the year, as countries like China, South Korea and Japan continued to welcome more international travellers1. The increase in travel activity in Asia Pacific was driven predominantly by the leisure segment, with corporate travel recovering to less than 30% of pre-pandemic levels2. Most markets experienced a recovery in domestic travel first, followed by international travel3. In markets such as Australia and Singapore, large-scale activities like sporting and MICE events as well as concerts continued to pick up, further boosting demand. China, the world’s predominant outbound market pre-COVID-19, completed its reopening in 2023, having removed all domestic travel requirements in December 2022 and the requirement for inbound travellers to submit a negative COVID-19 test result in August 2023. Outbound travel increased gradually thereafter, at a slower pace than initially expected. This was due to factors such as cautious spending in view of high travel costs, slow visa processing speeds and safety concerns, which translated into a greater proportion of Chinese travellers opting to travel domestically. Pent-up demand in early 2023 boosted room rates in Asia Pacific significantly, with many markets recording room rates above pre-pandemic peaks in 1H 2023. Tokyo led the expansion with an increase of 122% YoY2. As of late 2023, market Revenue Per Available Room (RevPAR) for Asia Pacific had reached 95% of 2019 levels4. Singapore was amongst the top five countries in RevPAR performance globally, while China, Vietnam and the Philippines lagged 2019 levels5. Amongst CLAS' key markets, Australia, Japan and Singapore continued to exceed pre-COVID-19 same-store RevPAU levels in 4Q 2023. In China and Vietnam, RevPAU of our serviced residences continued to improve quarter-on-quarter, performing at above 85% of pre-COVID-19 levels in 4Q 2023. ANTICIPATING FURTHER UPSIDE IN 2024 International visitor arrivals for Asia Pacific are forecasted to reach 2019 levels by the end of 20246. Supporting this growth is an increase in international flights to and from China, which are expected to recover to 80% of pre-COVID-19 levels by 20247. Asia Pacific markets are poised to benefit from the increase in China flights as group travellers seek short-haul destinations like South Korea and Japan6, or countries like Singapore and Malaysia where there is greater flexibility in visa requirements facilitated by bilateral agreements. For the Spring Festival period in February 2024, China outbound bookings had increased tenfold compared to 2023, and the growth was seen particularly in Southeast Asia, Japan and South Korea1. Nonetheless, the return of China outbound tourism is expected to be gradual, and a full return to prepandemic levels may not occur until 20256. Corporate travel in the region is projected to increase. Apart from China’s reopening, robust domestic demand in Japan, South Korea and Australia is also anticipated to drive this growth. The return of international business travel is expected to boost YoY performance more prominently in Southeast Asian countries such as Singapore and Malaysia which are more reliant on international arrivals8. Further supporting the sector’s recovery is a limited supply pipeline, as the supply growth rate for major Asia Pacific markets is expected to slow from 2023 to 2026, compared to their historical averages6. Average Daily Rate (ADR) growth is expected to normalise in most of the region in 2024, and occupancy growth is expected to be the key driver of RevPAR growth6. With more than 55% of our assets in Asia Pacific and most of the properties under management contracts, CLAS is well-positioned to ride the continued recovery of the region. 1 Source: UNWTO (2024) 2 Source: Savills (2023) 3 Source: HVS (2023) 4 Source: JLL (2023) 5 Source: STR (2024) 6 Source: CBRE (2023 and 2024) 7 Source: Reuters (2024) 8 Source: Global Business Travel Association (2023) 30 CAPITALAND ASCOTT TRUST
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