Hotel occupancy levels in the Asia-Pacific continue to rise steadily following the reopening of all key markets, the ramping up of airline capacity, and a strong pick-up in conferences and events around the region, according to a recent report.
The upward trend comes amid headwinds to the hotel sector attributable to a tight labour market, rising energy costs, alongside pressure on corporate travel spend, geopolitical tensions and high cost of travel, finds the Hotel Operators’ Sentiment Survey 2023 report, published by commercial real estate and investment management firm JLL, and conducted with over 360 hotel operators across the region to gather the sentiment of hotel owners and operators.
Amid strong tourism demand and macro-economic headwinds, the reports states, there remains an industry disconnect and uncertainty. In markets such as Bali, Phuket and Singapore, average daily rates (ADRs) have surpassed pre-pandemic levels by over 20%, primarily driven by leisure tourists.
And 77% of hotels in the region, the survey indicates, anticipate a further rise in occupancy levels in 2024, particularly in the upper upscale and luxury segments. Furthermore, 73% of hotels expect ADR to rise. Among the sub-regions, Southeast Asia exhibits the most optimistic outlook, attributable to strong tourist arrival growth momentum in most countries.
Most respondents (66%) are optimistic about total revenue exceeding pre-pandemic levels in 2024, the survey shows, while sentiment in the economy segment remains lower (33%). Economy hotels are less optimistic due to reliance on tourist groups and the increased cost of travel.
However, the recent expansion of group tours’ destinations from China from August 2023 to include Australia, South Korea and Japan is expected to bring positive prospects for economy hotels in the next six to 12 months.
“Leisure travel continued to drive demand in Asia-Pacific in the first half of 2023,” says Nihat Ercan, CEO for JLL’s Asia-Pacific hotels and hospitality group. “Concurrently, corporate spending has been under pressure, but we’re witnessing a steady increase in bookings from both leisure and business, supported by a growing number of major sporting and business events”.
Labour, technology
The labour shortage in the region has led to increasing associated costs since 2022; and by 2024, labour costs, the report notes, are expected to have increased by 10% to 20% compared with 2019. In many cases, this has been somewhat mitigated by redefining job roles, reducing service standards, and reducing maximum occupancy.
While adoption of technological advancements, such as mobile check-in, cleaning robots and guest request tools, could help mitigate some of this labour constraint, the hospitality sector, known for its higher level of service touch points, has been relatively slower in adopting technology.
Energy, ESG
Energy prices in the region have also been rising, the report points out, due to ongoing political unrest and post-pandemic challenges. Looking forward to 2024, 32% of the respondents expect to see energy costs increase by more than 10%, which is down significantly from the 51% currently experiencing 10% or more in 2023 compared with 2022.
This indicates that energy costs will be a reduced concern for hotels in 2024 compared with this year, attributable to energy-saving measures implemented by hotels that have adopted sustainability initiatives, positively impacting their cost base.
Stakeholders in the hotel sector, the survey reveals, are becoming increasingly aware of the need to embrace sustainability and broader environmental, social and governance (ESG) principals. Some 65% of respondents have now implemented a carbon emission reduction plan. Notably, a higher proportion of hotels in the higher-end segments have embraced this initiative.
As investors and guests favour ESG supportive hotels, the inclusion of green terms and incentives into hotel management agreements may align the interest between owners and operators around sustainability measures. However, hotels in the region continue to face challenges in their sustainability journey, including the lack of funds, lack of in-house expertise and technology.
Challenges ahead
In 2022, the main challenge faced by hotel operators, according to the report, was the difficulty in measuring sustainability goals. To spur positive change in the region, the Uniform System of Accounts for the Lodging Industry will be updated by early 2025 to incorporate sustainability metrics and various reporting guidelines.
By obtaining a sustainability rating, hotels can demonstrate their commitment to environmental standards, energy efficiency, waste management, water conservation and other sustainable initiatives. The majority of hotels in Asia-Pacific intend to get their ratings by 2024, an increase from the 38% who are already rated.
“The hotel sector has seen a remarkable comeback after the pandemic, yet there are headwinds, which need to be navigated in the medium term, and continued profit growth will take more active management,” says Xander Nijnens, JLL’s head of advisory and asset management for Asia-Pacific. “With changing guest preferences and increased competition, owners should take the opportunity to critically look at their concept and positioning, rethink their market segmentation, evolve their approach to attracting and retaining talent, and commit to a clear sustainability pathway.”
