The Asia Pacific (Apac) hospitality sector has seen a rapid rebound in recent years following the Covid-19 pandemic. Going into 2025, that momentum has now morphed into a more measured pace, as the sector transitions from recovery to stabilisation, says real estate consultancy Colliers.
“As high-performing markets begin to stabilise, the narrative is evolving from recovery to a new norm,” remarks Govinda Singh, Colliers’ executive director, Apac capital markets, hotels and hospitality and advisory.
Amid this transition, the Apac hotel investment sector saw a dip in deal activity at the start of the year. In its Asia Pacific Hospitality Insights May 2025 report, Colliers highlights that Apac hotel investment volume fell 19% y-o-y to US$2.1 billion ($2.71 billion) in 1Q2025. This comes as Apac hotel investment yields rose a second consecutive quarter to reach an average of 5.4% last quarter.
Nonetheless, capital continues to target hospitality assets in high-liquidity markets such as Japan, South Korea and Australia, which saw the most activity in 1Q2025, according to Colliers’ report. Singapore also continues to stand out as a key destination for generational wealth investment, the report adds.
Singh notes that the y-o-y dip in hospitality real estate deals is not unexpected, given that the first quarter is typically a slow period for transactions. Furthermore, geopolitical uncertainty may have contributed to investors adopting a cautious, “wait-and-see” approach.
Still, Singh believes that rather than retreating, investors are recalibrating. “With pricing holding firm, investors are shifting away from cap rate compression and toward value-add strategies focused on cash flow and income growth to drive returns,” he says. He anticipates a pick-up in hotel deal activity over the rest of the year as market conditions stablilise and the imperative to deploy capital intensifies.
Colliers’ optimistic outlook for the sector follows resilient hotel performance in 1Q2025. Citing data from CoStar, the US real estate data and analytics firm, the report highlights that revenue per available room (RevPAR) across Apac climbed 2.1% y-o-y last quarter, accelerating from the 0.4% growth recorded the year before.
The higher RevPAR was underpinned by improved average daily room rates (ADR), which rose 3.3% y-o-y to US$92 in 1Q2025. Among the key regional markets, Thailand and Japan were the biggest contributors, charting ADR gains of 14.7% and 11.9% to reach US$154 and US$12,7, respectively.
On the other hand, some of the traditionally high-value markets, such as Singapore and Hong Kong, saw rates soften last quarter. Singapore’s ADR fell 5% to US$232, while Hong Kong’s ADR declined 3.8% to US$171. “This reflects a shift in pricing dynamics as established destinations adapt to evolving patterns and guest expectations,” the report adds.
While ADRs drove RevPar gains in 1Q2025, rate momentum is slowing. According to Singh, the next phase of growth in the hotel sector will hinge on driving occupancy, operational precision and guest experience, especially as supply remains measured given high construction costs.
Destinations that are leading the way include Phuket, Tokyo, New Delhi, Mumbai and Osaka, which all saw strong ADR growth last quarter, backed by domestic demand, a surge in international travel, and effective market positioning. “These markets exemplify rate-driven performance strategy but also set the benchmark for value-oriented expansion in the region’s hospitality sector,” Singh continues.
Colliers’ report also highlights that countries that were previously reliant on Chinese tourists are now looking to tap into a growing base of Indian travellers. “With India’s middle and upper classes expanding rapidly, Indian travellers are not only spending more per stay but are increasingly seeking experience-driven travel. As a result, they are becoming a reliable and consistent source market year-round,” Singh explains.
