sentiment survey final - horwath htl corporate · 2020. 3. 30. · the survey in general focuses on...

HongKongHotelMarketSentimentSurveyAmidCOVID-19PandemicMarch2020

HongKongHotelMarketSentimentSurveyAmidCOVID-19Pandemic

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INTRODUCTION

The Horwath HTLHong Kong HotelMarket Sentiment Survey is part of a broad global survey that gives a quickassessmentofthemarketoutlookfortheglobalhotelindustry.Thesurveyingeneralfocusesonthecurrentoutlookforoccupancy,averageroomratesandtotalrevenueandwhattheoperatorsfeelisgoingtohappenbasedontheirexperience.

InthiseditionofHongKongHotelMarketSentimentSurvey,thequestionnaireisspeciallydesignedtoexaminehowthepandemicisimpactinghoteliers’outlookfortheHongKonghotelmarketgiventhatthespreadofCOVID-19upendsmarketsandroilsbusinessesglobally.WealsoreviewedthetrendoftheoverallHongKonghotelmarketperformancein2019whichwasnegativelyimpactedbythesocialcampaigninthesecondhalfoftheyear.

SHAREOFRESPONDENTSByLocation

Thesix-questionsurveyfocusedontheassessmentofthedegreeoftheinfluenceonthehotelmarketbytheCoronavirus Disease 2019(COVID-19) outbreak, aswellastheexpectationsonoccupancy,ADRandtotalrevenueforthefirsthalfof2020.Supported by our valued hotel partners, weaggregatedthesentimentof58respondentsasat18March2020,representing20percentofallhotelsinHongKong.57percentoftherespondinghotelscamefrom Hong Kong Island, 36 percent from Kowloon,and7percentfromtheNewTerritories.Itisnotsurprisingtofindthatmosthoteliershaveapessimistic outlook for the first half of 2020. Thefollowingsectionswilldetailandanalyzethesurveyresults.

HongKongHotelMarketSentimentSurveyAmidCOVID-19Pandemic

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RecentMarketReview

Source: The Hong Kong Tourism Board


Due to the ongoing protest chaos and the coronavirus outbreak, the Hong Kong hotelmarket is currently facingunprecedentedchallenges.Asindicatedbythegraphabove,themarkethaswitnessedasignificantdecreaseinbothoccupancyandaveragedailyrate(ADR)levelssinceAugust2019.Afteraprolongedperiodofhighoccupancyataround90percent,August2019wasthefirstmonththatreflectedtheprotest’snotableimpact.DuringAugust2019,visitorarrivalstoHongKongdeclinedby39percentresultinginthelowestoccupancyraterecordat66percent,sincetheoutbreakofSARS in2003.As thevisitorarrivals toHongKongcontinuedtodrop inQ42019, theoccupancy levelremained between 61 percent and 68 percent throughout to the end of the year. The year round occupancy rateplummetedby13percentagepointsto79percentcomparedto2018,whiletheADRdecreasedby12percenttoHKD1,206.Asaresult,therevenueperavailableroom(RevPAR)droppedby24percenttoHKD953.In2020,theoutbreakofCOVID-19exacerbatedthedecline.WHOdeclaredCOVID-19aPublicHealthEmergencyofInternational Concern on 30 January and later referred it as a pandemic on 11 March 2020. Starting the travelrestrictionswithintheregiontoacrosstheglobe,visitorarrivalstoHongKongcontinuetodropsharply.Startingfrom25March2020,non-residentswouldnotbeallowed intoHongKong, transitpassengers included, for a two-weekperiod.Accordingly,thelocalhotelmarkethasbeenandwillcontinuetobeseverelyaffected.ToprovidetheHongKonghotelindustrywithaquickassessmentofthefuturemarket,thissurveyisconductedtoassessthemarketoutlookamidthecoronavirusoutbreak.

1,345 1,378 1,456 1,3911,246 1,159 1,114

1,061 1,016 1,134 1,119 1,053 1,012

92% 91% 92% 89% 88% 87% 86%

66% 63% 68% 66% 61% 59%

0%

20%

40%

60%

80%

100%

0200400600800

1,0001,2001,4001,6001,800

Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20

Hong Kong Hotels Monthly PerformanceJan 2019 - Jan 2020

ADR (HKD) Occupancy

5,143,734 5,196,969

3,590,5713,104,049 3,311,571

2,646,1273,191,466 3,207,8029%

-5%

-39% -34% -44%-56%

-52% -53%-60%

-40%

-20%

0%

20%

40%

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20

Hong Kong Monthly Visitor ArrivalsJun 2019 - Jan 2020

Visitor Arrivals Year-on-year Growth Rate


HongKongHotelMarketSentimentSurveyAmidCovid-19Pandemic

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HotelMarketOutlook

“Most of respondents expect that theimpact of COVID-19 will last till H22020.”

Question1:Basedonthecurrentsituation,inregardto hotels’ overall performances, howlong do you expect the impact of thisoutbreaktolast?

Thefirstsurveyquestiongaugedhoteliers’expectations on how long the impact ofCOVID-19 on the overall hotel performance would last. 65 percent of the hoteliersbelievethatitwilllastfor4-6monthswhile26percentexpecttheimpacttopersistintoQ4 2020. Only less than 10 percent ofhoteliers believe that the impact of thecoronavirusonoperatingperformancewilllastfor3monthsorless.The first COVID-19 case confirmed inDecember2019andtheoutbreakappearedinlateJanuary2020inChina.Theviruslaterwidely spreads to Japan, Korean, EuropeandtheStates.Asthenumberofconfirmedcasescontinuetoriseacrosstheworld,itisunlikelytowaneinashortperiodoftime.The health crisis also poses challenges tothe global economy and discourage allinternational travel. Given that travelrestrictions and mandatory quarantinemeasures imposed by more than 140countries resulting in drastic decrease invisitor arrivals, vast majority (91%) ofhoteliersexpecttheimpactofCOVID-19willlastmorethan3months.

2 Months 2% 3 Months

7%

4-6 Months 65%

More than 6 Months

26%



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Question2:The status of operationaldepartments during coronavirusepidemic:

RoomsDue to the rapid pace of bookingcancellation, hotels operations arestreamlinedtoreducecost.52percentof participating hotels have partiallyclosed their guestroom floors, 48percent of participating hotels stilloperatetheirroominventoryinfull.

F&BOnly 19 percent of respondents claimtheir F&B outlets are in normaloperations, while 14 percent ofrespondents have temporarily shutdown their F&Boutlets. 45percent ofrespondinghotelshaveclosedsomeoftheir F&B outlets. The remaining 22percentofrespondentsdonothaveon-siteF&Boperations.As a result of COVID-19, guests andlocalsavoiddiningoutandgatheringinrestaurant to mitigate the risk ofinfection.Ontheotherhand,thereisaconsiderably increasing demand forfooddeliveryandtakeawayservices.Tocater to thismarket, somerestaurantsat upscale hotels have started topromote and expand their takeawayand food delivery services that haveneverbeenseenbefore.SpaThe operation of spa facilities is alsoaffectedseverelyduetopublic’shealthsafety concern. Approximately 50percentofthehotelspashaveclosedorscaled down their operationstemporarily. Only 46 percent of therespondents operate their spa asbusinessnormal.

Normal48%

Partially Close52%

Rooms

Normal19%

Partially Close45%

NIL22%

Close14%

F & B

Normal9%

Partially Close3%

Close29%

NIL59%

SPA



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HotelPerformanceExpectation

“Themajorityofrespondentsbelievethat Occupancy, ADR and TotalRevenue will fall significantly in H12020.”

MarketExpectations -60%vsH12019

Occupancy 60%

AverageDailyRate 43%

TotalRevenue 71%

Question3:Given the outbreak of COVID-19,what is your expectation forgrowth/decline of the overall HongKonghotelmarketinfirsthalf2020versusfirsthalf2019?OccupancyMore than 95 percent of respondentsexpect the occupancy of H1 2020 todropcomparedtoH12019.Specifically,60 percent of respondents expect theoccupancy to drop by more than 60percentand29percentofrespondentsexpecttheoccupancytodropby40-60percent.Only7percentofrespondentsexpect it to decrease by less than 40percent. While 4 percent ofrespondentsexpect it toremainstableorincrease.

AverageDailyRateAgain,over95percentof respondentsexpecttheADRofH12020tobelowerthan that ofH1 2019. Specifically, 43percentofrespondentsexpecttheADRtodropbymorethan60percentinH12020 versus H1 2019, 20 percent ofrespondentsexpecttheADRtodropby40-60 percent, 28 percent ofrespondentsexpectADRtodecreaseby21-40 percent, 5 percent ofrespondentsexpectittodecreaseby1-20 percent and 2 percent ofrespondents expect status quo.Surprisingly, there is 2 percent ofrespondentsexpecttheADRtoincreaseby1-20percent.

TotalRevenueAsa result,71percentof respondentsexpect the hotel’s total revenue in H12020todropbymorethan60percentcompared to H1 2020. 19 percent ofrespondentsexpectittodropby40-60percent, 9 percent of respondentsexpect revenue to decrease by 21-40percent, 9 percent of respondentsexpect it to decrease by 1-20 percent.Only 2 percent of respondents expecttherevenuetoremainstable.



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Question4:Howareeachofthemajordemandsegmentsexpectedtobeaffectedbythe outbreak of COVID-19 in firsthalf2020versusfirsthalf2019?The fifth survey question gauged ourrespondents’ expectations for themajor demand segments (Corporate,MICEandLeisure)in2020.Hoteliers in Hong Kong areoverwhelmingly pessimistic about allmarket segments, expecting poorerperformance versus H1 2019. Inparticular, more than 94 percent ofrespondentsexpectextremedeclineinMICEandLeisuremarkets.Theoutlook forCorporate segment isrelatively less pessimistic comparedwithothersegments.Still,themajorityof respondents show very negativeabout the future performance of thecorporate segment, with about 90percent expecting a much worseperformance.



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Question5:Undertheimpactofthecoronavirusoutbreak, what is your predictionontheperformanceofthefollowingsource markets in the first half of2020?Respondents generally show verynegativeviewsonallsourcemarkets.In particular, 90 percent ofrespondents expect Japan and Koreamarkets to have “very poor”performanceinH12020.In general, more than 90 percent ofrespondents expect all markets toeitherperformverypoororpoorinH12020. Respondents are slightlypositive onMacao, Taiwan and othersoutheast markets given thatapproximately 70 percent ofrespondents predict these threemarkets to perform very poor in H12020, while other markets includingMainland China unexpectedly arepredicted to be performed very poorbyover75percentofrespondents.



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Question6:ComparedtotheSARSoutbreakin2003,do you think the impact of thecoronavirus outbreak will be better orworseregardinghotels’performances?The vast majority of respondents expectthattheimpactofCOVID-19ismuchworseand severe than that of SARS on hotelperformances.Asat26March2020,theconfirmedcasesofCOVID-19havesurpassed480,000globally,which has far exceeded that of SARS. In2003, the SARS outbreak infected around8,000withthemajorityofcasesinmainlandChinaandHongKong. ComparedtoSARS,the COVID-19 is spreading much morequicklyandwidelyacrosstheworld.

Let’s take a look at the hotel marketperformancesamidandafter theoutbreakofSARS.ThefirstSARScasewasconfirmedin December 2002. The outbreak was inApril2003anditwascontrolledinJuly.Asindicatedinthegraphontheleft,themarkethad been essentially affected for a shortperiodoftimefromApriltoJuneandbegantowitnessstrongreboundsinceJuly2003.Asaresult, theyear-roundoccupancyratestillmanagedtoreach70percentwhiletheADR declined by merely 4.3 percentcomparedto2002.Therecoverycontinuedin 2004 and resulted in record highoccupancyandADRlevels.Will Hong Kong hotel market see similarrebound after COVID-19? One shouldacknowledgethatthestrongrecoveryafterSARS was greatly supported by theimplementations of Mainland and HongKong Closer Economic PartnershipArrangement (CEPA) and Individual VisitScheme (IVS) in 2003. In fact, there havebeen fewer and smaller-scaledemonstrations amid fear over COVID-19.However,ifprotestinanyformreturnsafterthe fighting of COVID-19, the economicrecovery will likely to be prolonged.Therefore,itisunlikelythattheHongKonghospitalityindustryaftertheendofCOVID-19couldgainstrongmomentumlikeSARSatleastintheshortterm.Themarketwouldrequirea longerperiodof timetorecover,whichexplainswhyrespondentsthinkthattheimpactwouldbemuchmoresevere.



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CONTACTUSHongKongOfficeSuite3807,CentralPlaza,18HarbourRoadWanchai,HongKongPhone:+85225246073Contacts:[email protected]:www.horwathhtl-hk.comwww.horwathhtl.com

sentiment survey final - horwath htl corporate · 2020. 3. 30. · the survey in general focuses on...

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