The Asia Pacific region has been a strong economic performer these past several years, following the global recession. Economic performance continues to vary greatly around the world, but performances by some countries in Asia Pacific have largely remained stable.

Although the region’s dependency on advanced economies appears to have reduced over time, owing to expanding regional demand and proliferation of South-South trade and investment, the region’s economies are still reliant on consumption demand from these economies. The debt crisis without a doubt makes Europe the most volatile region in the world at the moment and according to the United Nations, this situation presents the biggest threat to the global economy.

In the hospitality sector, while 2010 and 2011 were recovery years, where growth was relatively sharp and steady, 2012 had a mixed picture of growth, consolidation and decline in the different markets across the region. The markets that are continuing to grow are doing so mostly at a slower pace, albeit performance figures in actual terms are improving. Some markets are struggling due to slowing demand and the influx of new inventory.

Others are benefiting from increases in visitor arrivals and investors’ appetite. Overall, most markets are experiencing continuous growth in their pipeline and room stocks, at all levels, both in terms of international and domestic brands. India and China continue to have the largest pipelines in the region, as hotel groups have focused their business development efforts in China and India. Notable additions to supply can be also expected in Indonesia as well as in the Philippines, where the tourism industry is picking up momentum. Heightened competition and fluctuations in demand control the dynamics of the industry in the region, until markets consolidate and demand stabilizes.

Southeast Asia emerged as the fastest growing sub-region in Asia-Pacific with a 15 percent increase in international arrivals over the previous year. Intra-regional travel remains the major source of tourism in Asia Pacific supported by a network of low cost carriers. China and South Korea are the largest Asian source markets for Southeast Asia. Of note, the Russian Federation is now as important as the U.K. in terms of arrivals from Europe. South Asia was the second-fastest-growing market in terms of visitor arrivals. Among key destinations, Tokyo, Bangkok and Phuket recorded significant growth in terms of tourist arrivals in the first half of 2012. These markets demonstrated healthy performance, comparable to previous highs.

Seoul has been a strong performer in the region. Growth in Seoul was robust in 2011 and remained so in 2012, albeit at a slower pace. Korea’s sovereign credit rating by prominent rating agencies is up by one notch to the fourth highest level, thanks to the country’s strong fiscal position, economic resilience and reduced external vulnerability of the nation’s banks. While concerns remain over the strengthening won, which would hinder attracting price-sensitive leisure travelers, the economic rebound may boost business demand, countering the potential shortfall in leisure demand. Overall, the market-wide performance is expected to be stable in 2013.

With the exception of the Maldives (which reported a 5 percent decline), all other destinations within this sub-region performed well. Some markets like NCR witnessed a decline in overall occupancy rate due to supply additions in various micro markets. Yangon and Dhaka have been receiving significant interest from investors and hoteliers for the last few years. Among the regional hotspots, these two destinations have enjoyed buoyant performances and limited increases in inventory, which point to an optimistic outlook and growth opportunities. Singapore and Hong Kong, as open global economies, are more vulnerable to global fluctuations than most cities in the region. However, as these cities are the major regional economic centers and have more mature hotel markets, their performance figures have been fairly stable.

Going forward, the hospitality sector is likely to engage in sustained activities and investment. Over the next five years, substantial inventory will be introduced in the various micro markets across the region, where there might be some downward pressure on Key Performance Indexes in the short term. Still, the projections for 2013 in most markets seem positive and for Asia Pacific as one of the regions with the most attractive growth opportunities.

By Akshay Kulkarni

The author is regional director ― Hospitality, Cushman & Wakefield, the New York-based global commercial real estate consulting firm. ― Ed.