Asian Cities - 1H 2021

SPOTLIGHT Savills Research Hospitality

Retail sales in Beijing were up 4.4% year-on-year to RMB539.8 billion in 1H 2018 Taiwan Hospitality

Domestic tourism recovers in 2H/2020

THE PANDEMIC HITS THE TRAVEL As the pandemic was contained in the HOTELS IN URBAN AREAS FACE INDUSTRY second half of 2020, the government rolled HUGE CHALLENGES Since COVID-19 started to spread globally, out several stimulus plans to boost domestic The average occupancy nationwide stood at 14-day quarantine and the closure of borders tourism, including a NT$8 billion subsidy 30% in 1H/2020, a fall of 37 percentage points and airports has had a huge impact on to hotel and travel fi rms and ‘stimulus (ppts) compared with 1H/2019 and Taiwan’s tourism industry. Annual inbound vouchers’ with a total value of NT$51.1 City was hit hardest with occupancy dropping tourist numbers in 2020 dropped by 88% billion. Tourist attractions and hotels in by 50 ppts to 24%. The recovery of the YoY to 1.37 million and a wide range of non-urban areas are benefi tting most from domestic tourism market in the second half of businesses have been hit including airlines, the surge in domestic travel. However, the 2020 caused average occupancy nationwide travel agencies, duty free shops and tourist shrinkage of inbound tourist numbers as to rebound to 39% in 2020, however, hotels bus companies. Even though the government well as the frozen domestic tourism market in Taipei City continued to suff er, posting an has announced support schemes, the closure over 1H/2020 caused Taiwan’s 2020 tourism average rate of only 28%. Average daily room of companies and widespread layoff s have revenue to fall by 50% compared with 2019, rates (ADR) have remained stable in Taiwan been unavoidable in the hotel and travel equivalent to US$13 billion. declining modestly by 4% YoY to NT$3,608 in agency industries. 2020 while the ADR of hotels in Taipei City stood at NT$3,480, a fall of 21% YoY. Virtually nonexistent inbound arrivals, GRAPH 1: Number Of Inbound Arrivals, 2011 to 2020 including international business travellers,

China Japan Southeast Asia free independent travellers as well as Hong Kong & Macau Others Total % YoY (RHS) accommodation demand from the MICE 14,000,000 40% industry caused hotels in urban areas to face more severe challenges, even though a 12,000,000 20% national lockdown was not implemented, and business operations continued. W Hotel and 10,000,000 0% Le Meridien, 5-star hotels located in Xinyi area in Taipei City have seen a 30% occupancy 8,000,000 -20% % YOY rate which used to stand above 80% prior

6,000,000 -40% to the pandemic and a 20% decrease in ADR. F&B has become the main revenue 4,000,000 -60% driver contributing 70% of total revenues as accommodation revenues from the tourist NO. OF INBOUND ARRIVALS NO. 2,000,000 -80% hotel segment shank by 70% to NT$4 billion (2019: NT$14.6 billion), according to data 0 -100% from the Taiwan Tourism Bureau. 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Hoteliers have adopted new strategies Source Taiwan Tourism Bureau, Savills Research & Consultancy in order to survive, including becoming quarantine hotels and providing food delivery services. Some hoteliers in Taipei GRAPH 2: International Tourist Hotel Occupancy Rates, 2009 to 2020 City, especially en-bloc buildings in prime locations, even took this opportunity Taipei City City City Total to refurbish if they are suitable for the 90% government’s incentive program which allows an extra bonus fl oor area ratio. On the 80% other hand, hotels in non-urban areas close

70% to natural attractions, such as hot springs in Yilan, Taroko in Hualien and Alishan

60% National Scenic Area, are popular among local tourists. Their occupancy rates and 50% ADRs even surpassed the previous year’s performance. 40% INVESTORS HESITATE TO DEVELOP 30% 5-STAR HOTELS IN URBAN AREAS Despite the diffi cult situation, only a few 20% hotels faced closure in 2020. The total 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 number of tourist hotels and ordinary hotel Source Taiwan Tourism Bureau, Savills Research & Consultancy

savills.com.tw/insight-and-opinion/ 2 Taiwan Hospitality

segments fell by 4 (351 rooms) and 20 (2,614 rooms), respectively, with the total stock of rooms shrinking slightly by 1.5%. Some People eager for more outdoor space well-known hotels announced permanent helped hotels in suburban areas to closure, including Tayih Landis Hotel (315 rooms), The Landis Taichung post a performance surpassing last (202 rooms) and 85 Sky Tower Hotel (592 year, while hotels in urban areas are rooms). In addition, market uncertainty and volatility shook investor confi dence which facing severe challenges. led to several hotel development projects being postponed or cancelled. Huang

Hsiang Construction applied to change the GRAPH 3: International Tourist Hotel Room Rates, 2009 to 2020 construction permit of a hotel development project in the Taipei Station area, which was to be a 5-star hotel with 300 rooms Taipei City Kaohsiung City Taichung City Total with Marriott International, to be a Grade 6,000 A offi ce building. Fubon Land Development also cancelled their D1 land lot hotel project, 5,000 which is located close to and was originally planned to be the fi rst Rosewood 4,000 Hotel in Taiwan with over 200 rooms. The emerging trend of camping has also

3,000 challenged the hospitality industry, as customers are looking for more outdoor spaces due to concerns over indoor NT$ PER ROOM NT$ PER 2,000 transmission. There are over 2,000 camping sites in Taiwan, especially in the 1,000 mountainous areas of , Miaoli and Nantou, however, over 90% are illegal and 0 do not comply with land use regulations. 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Luxury camping is also becoming popular Source Taiwan Tourism Bureau, Savills Research & Consultancy with room rates no less than for 5-star hotels in some cases.

TABLE 1: Selected International Tourist Hotels In Taipei, 2020

ROOM RATE OCCUPANCY RATE HOTEL NO. OF ROOMS (NT$ PER NIGHT) (%)

W Taipei 405 6,890 28.7

Le Meridien 160 6,616 29.6

The Regent Taipei 538 4,203 44.2

Far Eastern Plaza 420 5,086 23.0

Taipei Mariott Hotel 318 4,684 32.8

Taipei Average 3,480 28.1

Source Taiwan Tourism Bureau, Savills Research & Consultancy

3 Taiwan Hospitality

HOTEL TRANSACTION VOLUMES REACH 14% and 11% respectively. Meanwhile, developers OUTLOOK RECORD HIGH are looking for motels in the city area in order to The tourism market is fi nding it diffi cult to shake In 2020, total hotel transaction volumes hit obtain development land. off the infl uence of COVID-19 and over the next NT$32.2 billion, a new high in recent years. One At present, several hotels are listed for sale, year cannot rely solely on domestic tourism to notable deal was Fubon Life’s acquisition of and en-bloc hotel buildings or motels are more off set the loss of inbound tourists. The recovery Sunworld Dynasty Hotel (730 rooms) for NT$26.8 popular than strata-title hotels. For potential hotel will depend on the resumption of cross-border investors there are still areas of concern including billion, the largest hotel transaction ever in the travel and business after an increase in the the falling number of Mainland Chinese tourists Taiwan property market and equivalent to NT$36.7 vaccination rate brings the world back to normal. due to escalating tensions between Taiwan and million per room. It is reported that Fubon Life In the short term, the hotel industry will continue China, the change of the inbound tourist structure will look to land consolidation with an adjoining to face challenges. However, the recent boom which has seen the share of FIT travellers growing, in the residential market could mean that the shopping mall in the future. In terms of buyers and the outbreak of COVID-19, which have prices of hotels in good locations will rise as during the period from 2017 to 2020, insurance challenged the operational ability and stability of opportunities for redevelopment grow. companies were signifi cant, accounting for 40%, tenants. Investors in the hotel sector are expected followed by hoteliers and local professional to focus more on redevelopment potential in the investment institutions, which accounted for longer term, not just short term rental income.

TABLE 2: Selected Hotel Transactions, 2020

SALES PRICE PRICE PER ROOM HOTEL LOCATION BUYER (NT$ MIL) (NT$ MIL)

Sunworld Dynasty Hotel Taipei City 26,800 36.7 Fubon Life

Kingdom Hotel Kaohsiung 1,500 5.0 Highwealth Construction

Royal Seasons Hotel Taipei Taipei City 1,100 10.0 Local investment institution

La Villa Motel Tainan City 876 33.7 San Far Property

Source Savills Research & Consultancy

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Savills Taiwan Savills Research Ricky Huang Eric Ting Simon Smith Managing Director Director Regional Head of Research +886 2 8789 5828 Taiwan & Consultancy, Asia Pacifi c [email protected] +886 2 8789 5828 +852 2842 4573 [email protected] [email protected]

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