The Nam Hai in Hoi An, Vietnam, is the flagship property in Asia for Adrian Zecha’s General Hotel Management Ltd., a Singapore-based luxury operator. GHM has a handful of properties in the pipeline for Asia.

Before getting into who is growing where and why, it is important to note the reasons for the popularity of investment and development in the region: Rapidly growing economies, rapidly growing wealth and rapidly emerging middle classes of travelers are the start of it all. Add the fact that governments recognize the potential of tourism and dedicate themselves to its growth, along with air carriers who are eager to serve intra-regional business and leisure travelers, and you have the perfect recipe for a hotel boom.

Andrew Jessop, Langham Hotels International vice president, has called Thailand the premier resort destination in Asia, and few would disagree.

While Hong Kong-based Langham plans to expand in five major Thai destinations over the next five years, U.S.-based Hilton Hotels Corp. sees potential for 20 Doubletree branded properties across the country in the same timeframe, according to Koos Klein, president, Hilton Hotels Asia Pacific. Key markets include Bangkok, Phuket, Koh Samui, Hua Hin, Chiang Mai and Krabi.

Starwood Hotels & Resorts Worldwide, meanwhile, plans 11 new hotels in Thailand over the next three years, including Le Méridien properties coming on board this year in Bangkok, Chiang Mai and Chiang Rai.

Carlson Hotels Worldwide, too, is a believer in the growth potential of Thai cities and resort locations, with plans to open Regent properties in Bangkok and Phuket in 2009, according to Martin Rinck, president and managing director, Carlson Hotels Worldwide - Asia Pacific.

Millennium Hotels and Resorts recently opened both the Millennium Sukhumvit Bangkok and Millennium Resort Phuket, and Fairmont Hotels & Resorts’ senior vice president of development, Matthew Sparks, says, “a Thai resort is very much part of our plan.”

Part of the growing interest in Phuket has to do with the introduction of budget airlines serving this market, and thanks to those carriers, the destination has seen its tourism numbers double in the past few years, according to Scott Hetherington, managing director, Asia, Jones Lang LaSalle Hotels.

-Octavio Gamarra, senior vice president, Dusit International

Regional players are ramping up in Thailand as well. Dusit Hotels & Resorts, Bangkok, already has 15 properties throughout the country, and currently is looking at two other locations. Why? “Two new markets are starting to visit Thailand in greater numbers: China and India,” says Octavio Gamarra, senior vice president, Dusit International. “We believe that there is still great potential.”

Pan Pacific Hotels & Resorts, now part of Singapore-based UOL Group, already is in Bangkok, and much like the big global brands, is keen on resort opportunities in Phuket, Koh Samui and Hua Hin. “This is where the best business opportunities are arising as infrastructure improves and more important, flight capacity improves,” says Kevin Croley, senior vice president, sales and marketing, Pan Pacific Hotels & Resorts.

Not wanting to be left out, another well known Pacific brand, Honolulu-based Outrigger Hotels & Resorts, recently announced it will manage a 400-room property as part of a new mixed-use resort in Phuket. “We’ve had our sights set on Thailand—Phuket in particular—for some time now,” says David Carey, president and CEO of Outrigger Enterprises Group. “[This] is Outrigger’s first venture into Thailand, but it certainly won’t be our only venture. We’re looking forward to gaining a significant presence within Asia over the next few years.”

Interestingly, even with all that buzz, some industry insiders say Thailand still is not the hottest of the “other” Asian markets. “Thailand is active, but not quite with the same intensity as Vietnam,” says Robert Hecker, managing director, Horwath Asia Pacific. Miguel Ko, president, Asia Pacific, Starwood Hotels & Resorts Worldwide, agrees. “I do see Vietnam giving Thailand a close race and maybe even overtaking Thailand in a couple of years. I am almost certain the tourism industry will become the largest industry in Vietnam in five years time.”

“Vietnam is by far the hottest market in the region for development,” Hecker says. Why? Increasing interest from both business and leisure travelers, and a short supply of upscale and high-end hotel rooms, with new projects still far from completion. That said, the country will add more than 100,000 hotel rooms over the couple of years to meet the growing tourism demand (arrivals were up 25% in 2007, according to the Vietnam National Administration of Tourism). But in the meantime, rates are on the rise, increasing some 40% last year, according to Smith Travel Research.

So what cities are of the most interest? Ho Chi Minh, Hanoi and Danang lead the pack, with companies like Accor, Carlson, Fairmont, IHG, Millennium, Pan Pacific, Langham, Banyan Tree and Best Western all looking to get in on the action.

InterContinental, for example, last month opened its first property in the country in Hanoi, “one of the liveliest cities in Asia,” according to Jon Nielson, general manager of the new InterContinental Hanoi Westlake. And with that asset in place, IHG plans to debut the InterContinental Danang Resort in the middle of next year, as well manage its first InterContinental branded property in Ho Chi Minh.

Swiss brand Mövenpick Hotels & Resorts also is in early, having signed management deals for two existing properties in Ho Chi Minh and Hanoi that are set to reopen under Mövenpick management by the end of the year.

And Accor, which already has a presence in Hanoi but plans a major expansion in the country (to the tune of 12 new properties by the end of 2010), now has opened an office in Ho Chi Minh to support the launch of its Pullman and Mercure brands and the expansion of its Novotel brand. Notably, Accor has plans for Pullman to lead its growth in the region, targeting 20 Pullman hotels in Asia Pacific by the end of next year and 100 Pullman properties across the region in the long term.

The new 679-room Fairmont Singapore is the first Fairmontbranded property operating in Asia, making it a key asset for the company, which plans to grow in strategic urban and resort locations throughout the region. Desirable destinations include Ho Chi Minh, Bali and Tokyo, says Matthew Sparks, Fairmont’s senior vice president of development.

SINGAPORE

Vietnam isn’t the only country in the region lacking inventory and thus attracting widespread development. “Singapore is on fire with a shortage of hotels, a rush to get new hotels built, and the impending impact of the integrated resorts,” Hecker notes. With tourist arrivals now above 10 million, rates there are on the rise as well, with increases similar to those seen in Vietnam.

“There has been good growth on rate premium,” Pan Pacific’s Croley says, “but you must look at it in context—it is coming off a low base relative to other cities in northern Asia. Singapore has traded at a much [greater] value.” That said, he expects healthy rate gains for 2008, likely in the 20% to 25% range.

“Singapore is a small but deep market, and a place we would like to expand in,” says Hilton’s Koos Klein. Millennium’s interest in the country is strong as well, thanks to its parent company’s strong asset position there. “There are some plans for new hotels in Singapore on the drawing board,” says Tan Kim Seng, senior vice president, operations, for Millennium & Copthorne International.

- Koos Klein, president, Hilton Hotels Asia Pacific

The Klang Valley, comprising Kuala Lumpur and its suburbs, is the focus of development in Malaysia. This area is expected to gain about 3,700 new hotel rooms and serviced suites across the mid-scale, upscale and luxury segments in 2008, a 9% increase according to HVS International.

Brands recently opening or seeking a presence in Kuala Lumpur include Mercure, Millennium, Pan Pacific and Grand Hyatt. Carlson hopes to be there as well, and Hilton sees the city as a place that could sustain an additional Hilton-branded property as well as some Doubletree hotels. “A Conrad in Kuala Lumpur would also be a great opportunity,” Klein says, but “the challenge in this market continues to be the rate.”

That said, rates are working their way up, as Shangri-La Hotel Kuala Lumpur saw a 13% increase in average room rate in 2007, as well as higher volume coming through F&B operations.

Outside the Klang Valley, Klein says Hilton is looking to grow its resort offerings in places like Langkawi, Penang and Kota Kinabalu, where a Mercure property also is set to open this year.

Preliminary foreign arrival figures of 154,000 for January 2008 (up 40% over January 2007) suggest a possible record-breaking start to the year for Bali, Hetherington says.

“Bali is making a huge comeback with lots of new development taking place,” Hecker notes, and Klein fully agrees. “Bali has bounced back and is booming,” he says. “We would like to see a Doubletree and Hilton there, and [also] to make a return to Jakarta with these two brands as well as the Conrad brand.”

Outrigger is another player establishing a presence in Bali, with two projects under way, and Dusit is in talks for a Dusit Devarana property there, Gamarra says. IHG also just announced two new Bali resorts—a Holiday Inn set to open late this year, and an InterContinental in the works for late 2009.

Hotel companies are looking to this market because “there is a tremendous amount of business potential,” says Best Western CEO David Kong. “There are a lot of people with a lot of wealth in [Indonesia]. And intra-Asia travel is huge between Indonesia and China, Korea and Japan.”

That said, growth in Indonesia “will be very much tied to its political stability,” Starwood’s Ko notes.

“There’s been increasing activity in the Philippines, but political turmoil is brewing again,” Hecker notes. For that reason, “The Philippines are markets we view on an opportunistic basis,” Hilton’s Klein says.

Others are more bullish. Carlson recently announced its entry into the market under the Regent and Radisson brands with management contracts for two new hotels in Manila to be completed and open by the end of next year. Given Manila’s position as a gateway, the company appears to hope the deals could lead to further expansion in the country.

Best Western, meanwhile, already has two hotels doing good business in the Philippines thanks to companies outsourcing there and a strong American presence, according to Kong, who says demand is strong.

Lone Star Funds, the Dallas-based buyout firm, in March reportedly canceled plans to sell more than 50 Japanese hotels, including its Chisun Hotel Group, because it could not get its asking price of as much as 170 billion yen (US$1.67 billion). The Solare Hotels and Resorts Co. properties were put on the market in December.

With a mature hotel market and the Japanese economy strong once again, last year Japan recorded the highest hotel transaction activity, totaling US$6.8 billion, according to Jones Lang LaSalle Hotels. This year looks to be no different: “We expect to see continued interest in the Japanese market with further significant transactions expected,” Hetherington says. Hecker agrees, noting that, “Japan is hot for transactions and repositioning of existing hotels.”

Goldman Sachs Group, Blackstone Group and KK DaVinci Advisors, which runs Japan’s biggest property fund, recently bid for Japan’s Chisun Hotel Group, owned by Dallas-based Lone Star Funds. However, late reports said a deal has not yet been completed due to differences in the bid and asking prices.

Also making news recently was Texas-based Benchmark Hospitality’s launch of Benchmark Hospitality International Japan. By joint-venturing with two Japanese partners who have a proven track record of developing the conference center concept in the country, Benchmark has enhanced its opportunities for significant future growth there.

In addition, Hecker notes that “IHG and the ANA deal is huge relative to the revamping of how the industry will operate going forward.”

He refers, of course, to the launch of IHG ANA Hotels Group Japan and the co-branding of eight hotels as ANA InterContinental and ANA Crowne Plaza hotels last year. Two additional resorts in Okinawa are set be co-branded as ANA InterContinental properties by 2009.

Hilton, meanwhile, recently announced that it will manage another property opening near Hokkaido in August. But the real news from that company may be yet to come, as Klein says Hilton sees “great potential in Japan to introduce our Hampton Inn by Hilton brand in a multi-unit rollout.”

The big story in Australia is the southwestern city of Perth, where a lack of new supply has occupancy levels in the 90% range and rates on the rise thanks to growing demand from interstate migrant workers, according to HVS International. According to the Australian Bureau of Statistics, Perth hotels achieved the highest occupancy rates in the country and registered the strongest RevPAR growth (23%) in 2007.

This is likely to continue for some time, as the city’s planned major redevelopment of the central business district’s waterfront will not even begin until 2011 or 2012, with completion not expected until 2015.

Interestingly, Berlin-based Design Hotels has opened an office in Perth, as “We feel it is time to approach [Australia],” according to Iain Ainsworth, executive vice president. “The opening of this office demonstrates our clear development strategy and marks our commitment to building stronger relations within the marketplace with new hotels.”

Direct comments to: derek.gale@reedbusiness.com