Asia Pacific hotel supply CAGR to slow to 2.3% till 2029
Elevated construction costs and constrained development may tighten new hotel supply, encouraging investors to pursue conversions and concentrate projects in upscale and above segments.
Asia Pacific hotel supply is forecast to grow at a 2.3% CAGR from 2025 to 2029F, less than half its historical 5.1% average.
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This is less than half the region’s historical average of 5.1%.
Hotel supply in Asia Pacific is expected to grow at a compound annual growth rate of around 2.3% from 2025 to 2029F, less than half the region's historical average of 5.1%, as high construction costs and a slow recovery in occupancy constrain new development, according to CBRE.
CBRE said 49% of new hotel supply through 2029 is expected to be located in mainland China. Excluding China from the forecast, regional hotel supply growth would fall to just 1.0% CAGR over the 2025-2029F period.
The consultancy said future supply is increasingly concentrated in the higher-end market, with 63% of upcoming projects through 2029 in the upscale and above segments. However, investors are also increasingly turning to conversions of existing buildings as an alternative to costly new construction.
Tokyo is particularly exposed to rising development costs. CBRE said the Japanese capital recorded the highest average construction costs in the region in 2026, with costs expected to rise by a further 10% in coming years. As a result, supply growth over the next three years is expected at just 0.3% CAGR, well below its historical average of 4.1%.
Even markets with comparatively lower construction costs, including emerging Southeast Asian cities and Shanghai, are expected to see slower growth in new hotel supply, CBRE said. New Delhi is the main exception, supported by relatively low construction costs and strong domestic demand.
CBRE also highlighted the growing role of hotel conversions. The expansion of lifestyle hotel brands is giving owners more options for repositioning and rebranding existing properties. Since 2020, around 170 lifestyle hotels, representing about 35,000 rooms, have opened across Asia Pacific through existing-building conversions, according to CBRE.
The findings point to a hotel development pipeline increasingly shaped not only by demand, but by construction economics, with conversions providing investors an alternative route to expanding portfolios as new-build costs remain elevated.