Monthly Trends
To fully understand how things are looking like in Asia Pacific, we need to take a step back and look at how things have progressed across the 4 key global hospitality regions over the past 40 months.
In January 2020, The Middle East was ahead of the curve by around 12%, while USA & EU (including the UK) were neck-and-neck at the baseline; however, APAC was behind by 18%. It’s not to say that any of these geographic regions were losing money, not at all, they were all very profitable; it’s just that The Middle East was surging, and APAC was falling behind.
Fast forward 6 months of sharp decline, the global low point in terms of GOP was clearly around June 2020 when the entire world was suffering. But that’s it, only 6 months of constant decline and from that point onwards things started to improve. Still a bad, bumpy ride for sure, but at least improving!
The Middle East climbed ahead of the three other regions by December 2020 and was the first to break through the GOP baseline of January 2020 by September 2021. The US caught up by March 22 and Europe just a couple of months later.
What about APAC? Well, it took another eight months for this part of the world to catch up with Europe and it only happened so soon because it is the natural low season in the EU and high season in Asia. However, the actual stabilized GOP only came at the end of April 2023, 40 months after Covid struck and finally on par with The US and Europe with The Middle East flying 30+ percentage points ahead of its nearest competitor.
But this raises a question: why has Asia fared so badly? Didn’t Phuket set the scene with the first non-quarantine arrivals by July 2021? Why all the doom and gloom?
Well, the answer is very simple. The US had a uniform opening across all states, Europe almost the same thing, and The Middle East was led by The UAE which holds a high percentage of rooms inventory across the region, and it was then followed by Saudi, Bahrain, Oman, Jordan, and the rest of the countries in very close sequence. And when they opened, it was full on without too many travel headaches or restrictions.
Asia on the other hand was a complete mixed bag with patchy border openings that didn’t inspire confidence until many months later. Also, there was no sequential effect here, often there were huge gaps between countries opening up, and long-haul higher rated businesses often came to Asia to explore multiple destinations at once, which for a long time was not possible.
As such the reliance fell on domestic and intra-regional travel which did not generate the high yield rates that could have a powerful GOP impact until just a few weeks and months ago. Also, China and Hong Kong opening in January and gradually picking up outbound flight seat capacity had helped the strong ride up throughout 2023 thus far.
Who is heading the charge? In Q1 2023, Singapore was the clear leader within the full-service properties followed by Sydney, Hong Kong then Phuket, while in the luxury bracket, it’s Hong Kong which is in the lead followed by Samui, Phuket, and then Singapore. All major destinations across the region are ahead of 2019 figures except for Ho Chi Minh, which is just shy also Jakarta and Hanoi which are on the fringe of turning positive.
What is missing now? The last piece of the puzzle? GOP isn’t all about topline of course. Controlling expenses effectively has a huge impact on this key metric.
Looking at the luxury hotel segment, booking costs are spiraling except for in the US; room expenses are also very high across the board at an average of 30% above the same time in 2019 while Admin & General (A&G) is posting the highest percentage change within Asia Pacific at almost 40%.
The single largest line item from all regions and all cost parameters has been energy and utilities with Europe almost reaching 80% growth over 2019; this is a massive burden that does not seem to be wavering. While the only area that is still behind in terms of cost is S&M expenses for APAC at 8% savings between Q1 2023 to Q1 2019. Hotels have still not re-manned as before and are not spending as freely yet to drive future business growth.
The US has managed expenses exceptionally well, followed by APAC, then The Middle East, and finally, the worst performer is Europe.
What next? Summer is upon us, and demand is looking exceptional throughout the globe. Let’s see how hotels manage their costs and yield their total revenue generation opportunities and we are looking forward to reviewing the data and sharing our findings come autumn. Exciting few months ahead.
Story contributed by Tareq Bagaeen, Senior Consultant at HotStats and founder of aQedina.com
