Apac Hotels Continue Attract Investments Supported Resilient Hotel Performance Colliers
The hospitality sector in the Asia Pacific region has experienced a swift recovery in recent years after the Covid-19 pandemic. As we enter 2025, the momentum has shifted to a more steady pace as the sector moves from recovery to stabilization, according to real estate firm Colliers. Executive Director Govinda Singh notes that as high-performing markets begin to stabilize, the focus is now shifting from recovery to a new normal.
Despite this transition, the hotel investment sector in the Asia Pacific saw a decline in deal activity at the beginning of the year. In the May 2025 edition of their Asia Pacific Hospitality Insights report, Colliers notes that hotel investment volume in the region dropped by 19% year-on-year to US$2.1 billion ($2.71 billion) in the first quarter of 2025. This is due to a second consecutive quarter of rising hotel investment yields, which reached an average of 5.4% in the last quarter.
However, capital investments continue to target hospitality assets in highly liquid markets such as Japan, South Korea, and Australia, which saw the most activity in the first quarter of 2025, according to Colliers’ report. Singapore also remains a popular destination for generational wealth investment, adds the report.
Singh explains that the year-on-year decline in hotel deals is not surprising, as the first quarter is typically a slow period for transactions. In addition, the uncertainty surrounding geopolitics may have contributed to investors taking a cautious “wait-and-see” approach. However, Singh believes that instead of retreating, investors are adjusting their strategies. He notes that with prices remaining stable, investors are shifting from capitalization rate compression to value-add strategies focused on increasing cash flow and income growth to drive returns. He anticipates a pickup in hotel deal activity for the rest of the year as market conditions stabilize, and the need to deploy capital intensifies.
Colliers’ optimistic outlook for the sector is supported by the resilient performance of hotels in the first quarter of 2025. Citing data from CoStar, the US-based real estate data and analytics firm, the report highlights that revenue per available room (RevPAR) in the Asia Pacific region increased by 2.1% year-on-year last quarter, up from 0.4% growth recorded the previous year.
The growth in RevPAR was driven by an increase in average daily room rates (ADR), which rose by 3.3% year-on-year to US$92 in the first quarter of 2025. Thailand and Japan were the main contributors to this growth, with ADR gains of 14.7% and 11.9%, respectively, reaching US$154 and US$127. However, some traditionally high-value markets such as Singapore and Hong Kong saw lower rates in the last quarter. Singapore’s ADR fell by 5% to US$232, while Hong Kong’s ADR declined by 3.8% to US$171. The report states that this reflects a shift in pricing dynamics as established destinations adapt to changing patterns and guest expectations.
Though ADRs were the main driver of RevPar growth in the first quarter of 2025, the momentum is now slowing. According to Singh, the next phase of growth in the hotel sector will depend on increasing occupancy rates, operational accuracy, and guest experience, especially as the supply remains limited due to high construction costs. Some of the destinations leading the way in these aspects include Phuket, Tokyo, New Delhi, Mumbai, and Osaka, which saw strong ADR growth last quarter, backed by domestic demand, a surge in international travel, and effective market positioning. Singh continues to say that these markets exemplify a rate-driven performance strategy, but also set the benchmark for value-oriented expansion in the region’s hospitality sector.
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The Colliers report also points out that countries that relied heavily on Chinese tourists in the past are now looking to attract a growing number of Indian travelers. With the rapid expansion of India’s middle and upper classes, Indian travelers are not only spending more per stay but are also seeking experiential travel. This makes them a reliable and consistent source of year-round tourism, explains Singh.