Issue #144 - Is the Honeymoon Period Over for South East Asia's Hotel Sector?
Thailand, Singapore, Indonesia, Malaysia & China experience a rate slowdown.
Welcome to issue 144 of Asia Travel Re:Set.
How do geo-economics impact travel flows in the developing markets of Asia Pacific?
It’s a question I get asked frequently. So, too, does our guest on this week’s The South East Asia Travel Show: Jesper Palmqvist of STR CoStar.
The answer is that there is no simple answer. You need to assess the form of economic shock or trade disruption and its initial and mid-term impacts - and how those vary depending on the exposure and/or resilience of each market and its source markets.
The continuing relevance of Covid-19 is a good example. Regional recovery sentiment among countries, destinations, travel operators and consumers remains differentiated.
So, let’s follow that train of thought…
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Is the Honeymoon Period Over for South East Asia's Hotel Sector?
"The narrative is changing [in ASEAN and China]. We're not talking about the pace of hotel rate growth anymore."
Stability and volatility may sound contradictory, but both terms help to explain hotel performance in South East Asian markets and China so far in 2024. To delve deeper into the evolving travel, lifestyle and geo-economic factors influencing the hotel sector, Hannah and I called up a man in-the-know: Singapore-based Jesper Palmqvist, Senior Director, Asia Pacific, at STR CoStar.
So, today’s newsletter is a little different. I’ve selected 10 compelling quotes from a broad-ranging discussion (there are many more!). These are presented in raw form without contextual stitching - which you can enjoy by listening to the podcast!
1) Halfway Stage of 2024
“I feel a bit contradictory because everyone can see there is a slowdown in growth and there is volatility, but I’m also talking a lot about stability - how can you have those things at the same time? It’s the remaining differences we still have that stand out.”
2) 2023 vs 2024
“2023 was, for many, a very good year and that sets new expectations. So far, 2024 has been more muted, but also more balanced. There is the new reality of high costs and high revenues.”
3) ASEAN ADR Slowdown
“We all knew that the pace of [post-pandemic] rate growth couldn’t continue. In markets like Thailand, Singapore, Indonesia and Malaysia there is a real slowdown in rate growth compared to the last couple of years.”
4) China ADR Slowdown
“It’s the best example of when we change the narrative and we’re not talking about the pace of growth anymore. It has to do with the macroeconomics of the country because it is largely a domestic market where domestic travel is doing very well. For 6 months. we’ve seen signals that people aren’t spending very much, and that goes viral very quickly across China. Price sensitivity is an issue, and that is likely to continue.”
5) Pipelines
“In many ASEAN markets, we are past the peak in terms of delivery of hotel rooms delayed during the pandemic - at least until the next wave comes later in the decade. We are entering an 18-24 month period of breathing space. Vietnam is the outlier where a lot of construction stalled.”
6) Second Half of 2024
“Our forecast is that there will be a bit more growth in demand across the region which as rates slow down further should make for a decent second half of the year. The booking window is changing how people plan and source markets and channels are also changing, which put different pressures on operators.”
7) Taylor Swift in Singapore, Japan & Australia
“When we looked at the pace of hotel booking in Singapore, we reached 25-30% occupancy very quickly. But in Australia, the pace was faster. One week after the concert dates were announced, over 50% occupancy was on the books. In Tokyo, her concerts didn’t really go big into hotel occupancy until very late in the game, so it happens differently across destinations. This is an interesting learning for the future.”
8) Singapore Vision 2040
“Length of stay has always been the conundrum, but Singapore is maturing very fast as a destination. It is adding new experiences in a very limited space and exciting hotel brands across classes, but it’s also increasingly about how Singapore stands out from a sustainability standpoint.”
9) Yield in an Inbound-only Market
“Singapore doesn’t really have a domestic market, so the arrivals numbers are very important to track. You need a diversity of source markets and also of visitors. It’s not just about high-yield arrivals, Singapore needs the groups as well.”
10) Cost & Affordability
“The Singapore dollar is strong, it follows the US dollar quite closely, so it is quite expensive as a destination, but the arrivals numbers keep growing, so they are succeeding to a large degree in promoting the experiences Singapore has to offer.”
Listen in full to The South East Asia Travel Show’s broad-ranging interview with Jesper Palmqvist of STR CoStar. We discuss consumer spending, hotel pipelines, differentiated luxury segments, booking windows, public holidays, weather patterns, and the return of seasonality throughout the region.
Plus, we address intra-ASEAN flight connectivity, interlocking travel factors in North East Asia and their impacts in ASEAN markets - and the developing post-pandemic trends in Singapore - which is a regional benchmark travel and hospitality market.
Listen to “Is South East Asia’s Era of Hotel Rate Growth Now Over?, with Jesper Palmqvist, STR CoStar,” here:
Or search for The South East Asia Travel Show on any podcast platform
And, that’s a wrap for issue 144.
The Asia Travel Re:Set newsletter will return next Sunday.
Until then, find me at LinkedIn, The South East Asia Travel Show and High-Yield Tourism.
Happy travels,
Gary