Australian hotels more resilient to virus

Australia’s hotel sector has so far bucked the Asia-wide trend of tumbling occupancy rates due to the coronavirus outbreak, in part because of its greater reliance on domestic tourism, a new report shows.

Between January 6 and February 16, weekly occupancy rates across Australia increased by 11 per cent to 73 per cent (in absolute terms), according to the latest figures from hotel research firm STR.

By contrast every other hotel market in Asia – apart from Indonesia, where occupancies were flat – has felt the direct impact of the virus and its associated curbs on outbound Chinese travel.

The worst-hit markets include Macau, where a 15-day shutdown of its casinos has seen its occupancy rate fall from 96 per cent to 3 per cent, Hong Kong (impacted by both the virus and a political crisis), down 64 per cent to a 25 per cent occupancy rate, and Taiwan down 59 per cent to a 26 per cent occupancy rate.

Also down sharply were Singapore, South Korea, Cambodia, Bali, Malaysia, Thailand and Vietnam, according to STR.

“Australia – with parts of it already affected by the bushfires – is seeing far less impact from COVID-19, compared to Asia,” said Jesper Palmqvist, Asia Pacific director at STR.

“When looking at daily data for the past 30-45 days, we can’t really see many state or territory capitals where business has dropped to a large degree in direct correlation to the key dates in COVID-19 spread, as in travel advisory decisions or the Chinese New Year.”

While China is Australia’s biggest inbound visitor market by number and spend, international visitors make up only about 10 per cent of the total tourism market.

The one exception, Mr Palmqvist said, was Queensland with lower occupancy rates reported in Tropical North Queensland (markets such as Cairns, Port Douglas and Daintree) and North Queensland.

“In Tropical North Queensland there has been a significant drop in occupancy driven by a combination of end of holidays and virus-related demand drop, but it is growing in the past couple of weeks,” he said.

Mr Palmqvist said rates dropped from $200 down to $170 and were now around $180.

However, he said markets such as Gold Coast (a market particularly popular with Chinese visitors) and Sunshine Coast were holding up well and reporting “pretty good numbers”.

“For many markets it’s business as usual for this time of year,” Mr Palmqvist said.

However, he cautioned that there remained an underlying concern, about the impact of future foreign booking cancellations, which are already expected to deliver a $4.5 billion hit to tourism due to the earlier bushfires.

The question is whether the push for more domestic tourism will be enough for all regional markets, to offset a potentially lagging effect of the coronavirus travel ban, Mr Palmqvist said.

In a separate report, commercial real estate agents Savills said it expected the hotel investment market to bounce back strongly, as it had following other global catastrophes such as 9-11, the 2003 SARS virus and the swine flu in 2009.

“Fortunately, beyond the constant barrage of news, property investors are sanguine and their capital appetite remains high for investment grade hotel stock,” said Savills.

“In time the bushfires will be extinguished and an antivirus will be developed to combat the COVID-19 virus.

“Things will return to normal; investor appetite for investment-grade hotel assets will continue unabated, and we anticipate a strong V-shaped recovery from any downturn caused by the adverse fire and virus impacts of 2019 and 2020.”

However, Mr Palmqvist said many regional operators were concerned about a drop in business in the months to come as bookings slowed and more cancellations occurred.