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COVID-19 impact on hotels in Asia Pacific
Thursday, 14th May 2020
Source : Hok Yean CHEE, Chariss Kok Xin, Peggy Lee

Asia Pacific Overview: The momentum in visitor arrivals has been lost due to the impact of the COVID-19 pandemic, January 2020 kick off with robust visitor arrivals before registering an average decrease of approximately 35% and 65% across the region in February and March, respectively.1

Similarly, the COVID-19 outbreak had cast a shadow over the hotel performance in Asia Pacific. Hotel occupancy decreased by an average of 9% and 27% in February and March, respectively. Average Daily Rate (ADR) decreased by an average of 7% and 10%, translating to an average decrease of 19% and 55% in February and March for Revenue Per Available Room (RevPAR), respectively.

In March, all the ten countries experienced a decline in occupancy rate, ADR and RevPAR within the range of approximately 20% to 35%, 6% to 17%, and 40% to 60%, respectively.

Some of the common measures to stem the spread of COVID-19 includes barring foreign visitors, 14-days quarantine, avoiding non-essential travel plans, enforcing social distancing, working from home, banning mass gatherings and events, and temporary closure of attractions, community facilities, entertainment venues, schools and places of worship.

To assist frontline health workers, affected businesses and employees, governments announced stimulus packages and various incentives such as providing credit facility, handing out cash grants, lowering of interest rates, wage subsidies, offering tax breaks, and supporting SMEs and hard-hit sectors.

While the pandemic is anticipated to prolong, hotels should start to draw up plans in preparation for a recovery. In the meanwhile, it is the perfect time to relook into operational strategies, cost-saving initiatives, refurbishment, marketing distribution channels, staff training and technology upgrade.

Global Measures

Globally, many countries have allocated or pledged record amount of economic relief package to cushion the impact caused by COVID-19. The following highlights some of the key initiatives:

China's central bank has cut the rate on reverse repurchase agreements by 20 basis points, the largest in nearly five years to relieve the economic pressure. The People's Bank of China had also injected RMB50 billion yuan into the money markets. Other forms of economic relief include relaxing penalties on bad debts, cutting interest rates, reducing taxes, allowing borrowers to skip interest payments for as long as six months, and pledging to adopt more "proactive" fiscal policies.

South Korea has pledged KRW96.7 trillion (USD80 billion) in economic stimulus, where KRW29.1 trillion will be granted as loans to small- and medium-sized companies, KRW20 trillion will be used to buy corporate bonds and commercial paper of companies facing a credit crunch, the Financial Services Commission announced a KRW10.7 trillion facility set up to stabilise stock markets. It will also commence a bond buying facility in April that will be funded by 84 institutions, including the Bank of Korea, commercial banks and insurers. The transport ministry, financial regulator and state-run Korea Development Bank has also announced that they would extend up to KRW300 billion of liquidity to domestic budget carriers to provide relief.

Thailand has announced an THB411 billion (USD12.7 billion) stimulus package in the form of soft loans, a fund, and tax benefits for those affected by the outbreak. The soft loan will amount to THB150 billion. There will also be relaxed debt repayments and lower interest rates for businesses, while the central bank has also asked banks to help debtors, withholding taxes for businesses to be reduced. Support for utilities costs, and higher tax benefits from some long-term fund investments were also announced. The government will set up a THB20 billion fund to help firms or workers affected by the coronavirus outbreak.

The United Kingdom has announced a stimulus package standing at £350 billion which include £330bn in state-backed loans for all businesses through the banking system with the help of the Bank of England, £20bn in other aid, a business rates holiday, and grants for retailers and pubs. Help for airlines is also being considered. Smaller businesses would be able to access cash grants of between £10,000 to £25,000 to see them through the crisis.

The United States of America (USA) has approved three stimulus packages worth USD2.5 trillion, which comes in the form of loans, tax breaks and direct payments for major corporations and individual taxpayers.

Australia

Source: Australia Government, Department of Infrastructure, Transport, Regional Development and Communication, HVS Research

Australia began restricting China arrivals on 1 February, Iran arrivals on 1 March, South Korean arrivals on 5 March and Italy arrivals on 11 March. Thereafter, the government started enforcing social distancing measures such as limiting the number of people per outdoor gathering, closing pubs and clubs, and limiting restaurants to take-away services only.

1 - Australia, Indonesia, Japan, Malaysia, Maldives, Myanmar, New Zealand, Philippines, Singapore and Vietnam

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