SINGAPORE: Pan Pacific Hotels Group is optimistic about tourism demand in Southeast Asia despite geopolitical tensions and rising travel costs, as more affluent travellers opt for shorter trips within the region while spending on premium experiences.
The Singapore-based hotel operator said demand has rebounded strongly in the second half of 2026 after a sharp downturn in the second quarter, putting it on track to potentially meet its full-year targets.
Chief executive Choe Peng Sum said the group's properties in Asia performed strongly in the first quarter before demand fell sharply in the second quarter due to the war between the United States and Iran.
Occupancy and average room rates subsequently rebounded in the third quarter, with the group expecting the recovery to continue into the final three months of the year.
"With that upswing, we're beginning to see that we can probably cover our budgets for the whole year," Choe told CNA’s Asia First on Thursday (Oct 15).
He said the conflict affected travel from the Middle East to the group's properties in Kuala Lumpur, Jakarta and Bangkok, but demand from leisure and corporate travellers subsequently picked up.
The recovery comes as Pan Pacific pushes ahead with plans for 10 new-build and major renovation projects across Southeast Asia in 2027.
The projects span Singapore, Malaysia, Thailand, Vietnam, Indonesia, Cambodia and the Philippines, including new luxury hotels in Bangkok and Phnom Penh.
SHORTER TRIPS, HIGHER SPENDING
Choe said rising travel costs and geopolitical uncertainty are changing how affluent travellers plan their holidays, with more opting for destinations closer to home.
"We’re beginning to see a lot of luxury travellers ... are taking shorter haul (trips)," he said, adding that more Asian travellers are holidaying within the region.
But travellers cutting back on longer journeys are not necessarily spending less on accommodation and experiences, he said.
"People are willing to pay for experience, not just a bed to sleep in," Choe said, noting that hotel club lounges remain popular among guests prepared to pay more for premium offerings.
Travellers are also increasingly drawn to hotels offering distinctive experiences, including properties that incorporate nature and sustainability into their design, he added.
SOUTHEAST ASIA BENEFITING FROM SHIFTING TRAVEL FLOWS
Within Southeast Asia, Choe highlighted Vietnam, Malaysia and Singapore as markets experiencing particularly strong demand.
Vietnam's tourism growth is extending beyond Ho Chi Minh City and Hanoi to resort destinations, he said, while the expansion of high-tech industries is also drawing more business travellers.
Pan Pacific's properties in Kuala Lumpur, Penang, Langkawi and Malacca have meanwhile recorded strong occupancy and average room rates.
Choe said the group's Singapore properties recorded double-digit growth in the third quarter, benefiting from major international events such as the Formula 1 Grand Prix and business conferences.
He added that changing Chinese travel patterns are also benefiting Southeast Asia, with tensions between China and Japan diverting some travellers towards the region.
"It's now no longer just tour groups. It's a lot of affluent free independent travellers from China and India coming through," Choe said.
"We're beginning to see a lot of that growth in our region: shorter haul, spending more money, experiencing Instagrammable Southeast Asia."