Investors eyeing Taiwan’s hospitality industry should focus on high-end resort facilities or partner with middle-priced international brands amid a growing room glut, Colliers International Taiwan (高力國際) said.
While inbound tourists have totaled more than 10 million annually since 2015, concerns about excessive competition have been growing, as more than 100,000 new guestrooms have entered the market annually since 2014, the real-estate consultancy said last week.
The trend, coupled with a continuing decline in business traveler numbers, has increasingly weighed on occupancy and squeezed profitability, it said, noting that room rates have seen corrections after peaking in 2014 and 2015 for tourist hotels and standard hotels.
There are three categories of accommodation in Taiwan — tourist hotels, standard hotels and homestays — based on their construction and facilities, space, management and service quality, and tourist hotels charge the highest rates, the consultancy said.
Daily room rates stood at NT$4,384 (US$142.66) for tourist hotels, whose occupancy rates averaged 73.2 percent in Taipei last year, which means that each room generated NT$3,209 in revenue, Colliers Taiwan said.
However, room charges less than NT$4,500 per night are not enough to keep rents below 20 percent of sales for a room of 13 ping (42.9m2) in Taipei, especially for grade-A space, it said.
“Room rate improvement thus represents the most important task for hotel operators,” it said.
A sharp decline in the number of business travelers — from 1.06 million in 2007 to 830,000 last year — makes that challenge all the more difficult, it said.
Luxury resort hotels in scenic areas, many of which feature hot spring facilities, have been the exception, as they serve mainly local tourists, it said.
There might also be earnings opportunity for alliances with low or middle-priced international brands whose penetration of Taiwan’s market is low, and this would require lower investment costs, it added.
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