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Hotel sector continues to face challenges in Asia Pacific

Posted by bsullivan on October 29, 2022

In the third quarter, the hotel sector continued to face challenges in Asia Pacific as the Delta variant infiltrates countries. Locally transmitted cases sprouted in China, impacting the market mostly led by domestic demand.

Demand remained subdued with Delta still very present

Further south, in Singapore, the rising number of new cases has led to several ‘Heightened Alerts’ and restrictions. However, demand remained relatively strong during school holidays and the Mid-Autumn festival, driven by domestic tourism.

The quarter was also marked by the partial reopening of Thailand to international visitors with the launch of the Sandbox initiative in Phuket and Koh Samui.

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New supply expected towards the end of the year

New supply remained limited in the region during the quarter, especially in markets with stricter border restrictions and controlled interstate movements such as in Hong Kong and Malaysia. We expect more supply to complete by the end of the year as owners and developers may want to coordinate the opening of the hotels with the announced reopening of borders. Meanwhile, in China, close to 3,000 keys should open by the end of 2021.

Growth in RevPAR remains driven by Chinese markets

As at YTD September 2021, the sector’s activity was mostly led by markets in China on the back of a strong domestic demand – both from the leisure and business segments. RevPAR in the country continued its impressive rise with a boost in both occupancy and ADR with the Mid-Autumn festival. In contrast, markets such as Bangkok witnessed a RevPAR decline year-on-year due to a lack of international travellers.

Growing optimism over plans of reopening borders

With higher vaccination rates, the region shows more and more confidence in reopening the borders to international travellers. Countries like Australia, Japan, Singapore and South Korea have announced to ease their quarantine measures to international travellers who are fully vaccinated by the end of the year. At the same time, we are witnessing a gradual lift of travel restrictions within the countries, like in Thailand and Malaysia, boosting domestic demand even more. With these announcements, we expect a strong rebound in tourism demand
by the end of the year and early 2022. 2021 should still depend entirely on progress with COVID-19, although some countries have adjusted their strategy to consider COVID-19 as endemic, thus learning to live with the virus.

By the end of 2021, we expect selected resort destinations to lead the demand with the roll-out of their tourism initiatives such as “Phuket Sandbox”, coupled with pent-up vaccination rates.

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