A round-up of Asia’s top hotel development destinations in 2013

At the recent World Hotels and Resort Development Conference in Bangkok, almost every panelist during the conference session was asked various iterations of the same question: if you had just one destination where you could build a hotel in Asia, which would it be?

Myanmar - huge potential,
big challenges

The answers were just as eclectic as the region itself, but there were a number of destinations that got more than one vote. Not surprisingly, this included Myanmar, a country that pretty much dominated the first day of this event. Delegates seemed to be in agreement that the opportunities that sprung up with the government’s sudden opening will outstrip the challenges. And challenges there are aplenty. Starting with the huge infrastructure inadequacies, the expansion of tourism also requires an upgrade in standards of service and leaves the hospitality industry facing a large need for quality staff that will likely outstrip availability. And while the Asian Development Bank is preparing a tourism master plan for Myanmar, there are no quick fixes and these issues are likely to hamper the country’s development into a major tourism destination for some years to come.

Looking elsewhere across the region, there were some predictables as well as some surprises when it came to nominating dream destinations.

Singapore, the champion of ADR in Asia, is of course the one market everyone would love to go into but the high entry barriers remain a deterrent for all but the deepest pockets. That said, with the container terminal being moved away from its current location and thus freeing up valuable land, we will definitely see another phase of high level development in the near to medium future. And as the government continues to set the pace in the region in terms building up Singapore as a tourist destination, I think we can see very solid ADR and revPAR numbers even with significant new supply in the market.

Other destinations the delegates at the conference pointed out as moving ahead in Asia included the Philippines, which was cited more than once as a substantially underserved market. With the simultaneous opening of The Raffles and Fairmont hotels in Manila in early December and many more projects in the pipeline, including casino hotels, this view is obviously shared by others.

Palwan - the new Bali?

But what about outside downtown Manila? One speaker pointed to Palawan, an island in the south west as a potential “new Bali”. Previously known mostly for viscous tourist kidnappings, the island now claims to be relatively safe, boasts UNESCO Heritage Sites, world class scuba diving, beaches and an ecologically diverse environment – certainly a perfect mix for creating an attractive tourist destination. But while its airport has been classified as international and is being fast tracked to becoming one of the primary gateways to the Philippines by the government, it remains to be seen whether an ambitious project like this will take off. It has been tried before in Cebu, and while that particular island doesn’t have Palawan’s natural pedigree, it shows that putting in an international airport and clustering some soulless resorts around it doesn’t make for a great destination. 

Phu Quoc - great beaches,
but still hard to get to

Opinions were very much divided about Vietnam, where on one hand development has recently been stifled due to high interest rates, but at the same time is seen as still having a lot of areas that could become premier destinations for their pristine environment – Phu Quoc, Vietnam’s largest island off the western coast got a particular mention here. But, just as in Myanmar, Vietnam is still plagued by substandard infrastructure, and unless the government commits seriously to improving this, I tend to agree that Vietnam remains a rather difficult country for the tourism industry. 

Markedly absent from the list of dream destinations for hoteliers was China. Not even “China’s Hawaii”, Hainan Island, which has long been tapped to become a leading international tourism resort destination, got a mention. While hotels continue to pour into this island on the Chinese South Coast, including a 337-room Shangri-La Hotel which opened in Haikou in early December, there seems to be some doubt that the island will be able to live up to its hype in the near future.

Phuket - still plenty of room to grow

When it came to beach resorts, delegates saved their enthusiasm for Bali and Phuket as still being the prime development markets in this category, despite a huge number of new properties being developed or already on the market. These two destinations are still viewed as the only world class beach resort destinations in Asia and with the predicted influx of Chinese middleclass travelers in the coming years, it seems there is still plenty of growth to be had – cop that Palawan!

Last not least, Sri Lanka got a fair share of positive sentiment from the delegates for its tourism friendly combination of beaches, history and all-round physical beauty as the "The Pearl of the Indian Ocean". This is of course another country that was only recently hauled back from the tourism wilderness after ending 30 years of civil war in 2009. However, unlike Myanmar, Sri Lanka nurtured a burgeoning tourism industry throughout the conflict in the far south of the island, far away from the civil war zones in the north, making the re-building of the tourism industry a lot easier.

To charge or not to charge... hotels’ dilemma over Internet access fees

There’s a lot of discussion out in the cloud about Internet access fees hotels are or aren’t charging and what the potential pitfalls are for those hotels that are seen as overcharging for access to the online world. As with many other issues that touch on the sensitive part of you parting with your money, there’s more than just one side to the story.

One of the points I find missing from the current discussions is behavioural conditioning. Of course, everyone wants a good deal, but the “everything is free” culture that now dominates the Internet has entered many aspects of life and this mindset, once ingrained, is difficult to change. The earliest culprits responsible for this development were the telcos who happily introduced all-you-can-eat broadband data-plans which encouraged people to download anything regardless of its bandwidth. However, regret followed swiftly when video overtook email and surfing as the largest consumer of internet bandwidth. This was amplified by the recent onset of serious gadget-lust triggered by smartphones and tablets. So it’s not surprising that we now see telcos far and wide wanting to withdraw their generosity and shepherd users back into the user-pays model.

These issues have of course serious implications for the hospitality world. Free WiFi has now shot past complimentary breakfast as a “must have” according to a 2010 survey of 53,000 US travelers (although I would argue that in Asia it’s still the other way round), indicating that we now regard basic internet access much like the complimentary water in the room. While free Wifi access has traditionally been the domain of newer and smaller hotels where infrastructure and bandwidth demands are relatively smaller, even luxury hotels, particularly here in Asia, are starting to seriously respond to this trend. In recent months, most of the big luxury chains have added free internet access as part of their loyalty programs, which are usually free to join, such as Marriott’s, while Shangri-La Hotels and Resorts even went one step further and now offers free WIFI and wired internet to all guests regardless of loyalty membership.

While this Free to Guest (FTG) internet trend casts a medium to long term disruption to HSIA hospitality service providers whose business models rely heavily on internet revenue share, hotels have a number of very good reasons to pursue this approach. Some of the hotels we have spoken to confirmed a greatly reduced complaint rate since introducing FTG, implying that people are less likely to complain about even slow or patchy connections if it is offered for free. This of course reduces the need for support resources and thus has an impact on overall costs. Another reason is brand equity. A large luxury chain’s brand essentially represents the overall guest experience, so FTG internet can become an important part of the hotel’s brand equity.  

But it’s at the point where usage patterns accelerate from surfing the net and emailing to streaming movies and doing video conferencing that internet access moves from a marketing tool to a much more complex issue. While using load balancing to move WiFi traffic across access points to even out demand may be a relatively simple way to keep Wifi free within reasonable bandwidth constraints, a tiered ‘freemium’ model where bandwidth usage up to a certain point is ‘free’ before charges kick in, may be a better way to address the problem of bandwidth heavy video clogging your network while still keeping broadband revenues on the balance sheet. This type of user-pays system mimics the one telcos have employed which has become very familiar to consumers and is likely to be readily accepted (I will return to the subject of tiered access in more detail in a later post). But either way, a chargeable service model will be unavoidable once OTT becomes a ubiquitous, mainstream content delivery platform, although this is yet a few years away.

Speaking of telcos though: if hotels are not already thinking about the issues above, they may consider that many mobile operators, particularly in Asia, are now offering prepaid data access packages for a fixed fee per day, even when roaming. During my last visit to Taiwan, I paid NT$700 (US$24) for voice and 5 days worth of 3G data access, which beat the US$15 per day internet access my hotel tried to charge me by several miles.

At the end of the day a hotel is a business and needs to make money for sure, but its raison d’être is to make guests comfortable, which may be a delicate balancing act when it comes to internet access charges, but one that I believe can be addressed with a careful look at the hotel’s strategy, infrastructure issues and brand values.