Asia’s retail and hospitality sectors are expected to benefit from strong growth in intra-regional travel, reports UMA SHANKARI DEVELOPERS are investing in the retail and hospitality sectors in Singapore and the rest of Asia in a big way, banking on an expected surge in retail spending and tourism. Consumer spending in the region is supported by rising income levels that are translating into retail sales and the development of the shopping scene into something closer to that in the US and Europe. One clear sign of positive retail sentiment is that many international and luxury brands are expanding into major retail hubs across Asia, CB Richard Ellis (CBRE) points out.Some of the world’s biggest names, including Bulgari and Giorgio Armani, unveiled flagship stores in Tokyo in the fourth quarter of 2007 - despite Japan’s overall sluggish economic recovery.

The rise in retail spending in Asia is also driven by growing

intra-regional tourism, industry players say.

Asia continues to benefit from its position as the world’s second-most

visited region after Europe, achieving record growth in terms of hotel

occupancy and average room rates in 2007.

South Asia and South-east Asia in particular enjoyed double-digit

growth in revenue per available room, with South Asia seeing a

40.4 per cent increase

and South-east Asia seeing 16.9 per cent growth, according to data

from industry body, the Pacific Asia Travel Association (Pata).

Cushman & Wakefield (C&W) noted in a recent report:

‘Inter-regional in-bound

visitors are expected to continue in the medium-term, but the greatest

growth will be intra-regional through the continuing expansion of road

and air routes throughout Asia, including budget airlines, as well as

the enhanced capacity of the new aircraft - the A380 and B787.’

Intra-Asia travel is expected to be especially strong on two routes -

Hong Kong traffic into Japan is expected to grow 17 per cent from 2007

to 2009, while the number of visitors from the Chinese mainland to

Singapore is expected to grow 16 per cent in the same period.

In view of all this, it is perhaps not surprising that investors and

developers are forking out big bucks for retail and hospitality

property such as hotels, serviced apartments and malls, as well as

assets such as retail and hotel-based real estate investment trusts

(Reits).

The interest in retail assets is driven by expectations of a

broad-based increase in rents and capital values in Singapore, brought

on by increased retail spending.

Singapore’s retail sector was especially active in 2007, with retail

sales totalling some $23.8 billion - 7.1 per cent higher than in 2006.

This year, retail sales are expected to grow about 5-10 per cent and

demand for retail space is expected to remain strong.

In a recent report, Credit Suisse said it expects retail growth here

to be supported by benign economic indicators, high population growth,

increasing household income, tourism growth and other ‘feel-good’

factors.

‘This is expected to drive rentals up 5-10 per cent, translating into

10 per cent rental revenue growth for suburban malls and 20 per cent

for central malls in 2008 given strong reversions,’ Credit Suisse

analysts Shirley Wong and Leng Chye Teo said.

The research team recently initiated coverage of three

Singapore-listed retail Reits: CapitaMall Trust, Frasers Centrepoint

Trust and Macquarie Meag Prime Reit, with ‘outperform’ calls on the

first two and a ‘neutral’ call on the third.

CBRE said similarly that retail rents are likely to increase in 2008,

albeit at a more moderate rate due to an abundance of choice for

retailers as a significant amount of new space comes on stream. ‘We

expect both Orchard Road and suburban mall rents to increase 3-5 per

cent in 2008, down from our earlier estimate of 4-7 per cent for

Orchard Road and 3-6 per cent for suburban malls,’ CBRE said.

However, the retail sector here will have to grapple with downside

risks such as rising inflation, the trickle- down impact of the US

sub-prime mortgage crisis and lacklustre global stock markets,

property analysts say.

The outlook for the hospitality sector is a bit more bullish. In

particular, Singapore, which enjoyed record growth in terms of both

occupancy and room rates in 2007, is expected to see more corporate

and meetings, incentives, conventions & exhibitions (MICE) travellers.

Industry players believe this

segment will continue to grow even if leisure tourism were to slow.

Hoteliers here have told BT they expect room rates to shoot up another

25-40 per cent this year, driven by the Formula One Grand Prix race

and the tight supply of hotel rooms. Room rates rose 15-25 per cent in

2007.

One new trend that is expected to shake up both the retail and

hospitality sectors across Asia is the arrival of gaming in a big way.

Right now, roulette wheels are spinning and jackpot machines are

whirring in casinos across a dozen Asian countries, C&W noted in a

report.

Investment in casinos is continuing apace in Macau - thought by many

to be Asia’s gambling capital - where there are currently more than 20

casino complexes. Singapore is about to open its own two integrated

resorts, while Japan is moving closer to an overhaul of its strict

gambling laws - which could see luxury casino complexes opening in

Tokyo and on the southern island of Okinawa by 2012. Other countries

reportedly considering lifting bans on casinos include Taiwan,

Thailand and Indonesia.

Said C&W: ‘Governments may not always be totally happy with the idea

of their citizens gambling, or tourists pouring in for slot machines

and blackjack, but Macau’s US$7.2 billion in gaming income, US$15

billion in investment in just five years, 68.7 per cent surge in

construction investment, an 80 per cent rise in property transactions,

large-scale convention centre and hotel construction, thousands of new

jobs and 19 per cent per annum retail sales growth are mighty powerful

inducements - and most (governments) seem to think these are numbers

worth betting on.

Source: Business Times

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