Sick and tired! - Once again, the industry in Asia Pacific is struggling for survival as the SARS epidemic and the Gulf war take a wicked toll on business. A look at how the region's long-suffering hoteliers are coping

I act the ignorant tourist and ask the receptionist for a map of Hong Kong. She hands me one with a nervous smile but, when I ask her where all the guests are, she pretends not to understand, excuses herself and picks up the phone.

It's a heart-rending scenario that is being repeated, to various degrees, at many hotels throughout the region as the fear of SARS (severe acute respiratory syndrome), coupled with the impact of the Gulf war, keeps both tourists and business travellers at home.

It is anyone's guess how long it will take the industry to make a full recovery, but the general prognosis is that it is unlikely to be swift, and that the scars will take some time to heal.

With the threat of the Gulf war hanging in the air for several months, most hotels in the region had made contingency plans to focus on intra-regional travel to compensate for the inevitable loss of long-haul business.

A worldwide travel advisory by the World Health Organisation against travelling to Hong Kong and China's Guangdong province - the first ever to be issued by the international health body - dealt a further debilitating body blow to the industry.

The move forced the Hong Kong Tourism Board to halt all marketing promotions, and to save its resources for a blitz campaign once things start returning to some sense of normality. The timing could not have been worse, as March and April are the peak months for trade fairs and exhibitions.

According to Federation of Hong Kong Hotel Owners executive director Michael Li, occupancy rates have plunged by up to 30%, while Morgan Stanley has predicted that Hong Kong could lose HK$2 billion (US$256 million) in tourism revenue in the next two months alone.

As cases were also confirmed in Singapore, Vietnam and China - and with international media blaring headlines containing such emotive phrases as "killer disease", "fear", "epidemic" and "panic" - both international and intra-regional travellers started to cancel or delay their trips to the region in droves.

"We are faced with a challenging situation and we must be flexible and open-minded in our approach," says Kurt Rufli, MD of Thailand's Amari Hotels.

His "get-on-with-business" attitude is echoed by Starwood. "It's a difficult situation for everyone, and this is the period for us to work closely together," says a company spokesperson.

There are four major threads of optimism running through the industry: that the SARS outbreak will be contained; the Gulf war will be short; cancelled or postponed events will be rescheduled; and travellers will return en masse due to pent-up demand.

But no one is in any doubt that the next two or three months are going to be tougher than anything they have ever gone through - tougher than 9/11, tougher than the Asian financial crisis and tougher than any recession.

The double body blow of the SARS outbreak and the Gulf war has already sent occupancies plunging throughout the region, as well as the stock prices of many of the major listed hotel groups, including the Hongkong and Shanghai Hotels and Shangri-La Asia.

Although Shangri-La Hotels and Resorts got off to a good start at the beginning of March, the month was likely to end about 8% down on forecast occupancy, according to a company spokesperson.

Worst affected are its properties in Hong Kong, Beijing, Shanghai, Shenzhen, Taipei and Singapore.

"Some business has been postponed, rather than cancelled, and the forecast for the next few weeks very much depends on whether SARS is quickly contained, and the protraction of the war in Iraq.

"Consequently, it is difficult to give any accurate predictions at this stage, especially given the fact that most of the group's properties are business hotels and the lead times for bookings is becoming increasingly shorter.

"However, it is estimated that occupancy levels will be reduced by about 15% for the group during the next few weeks."

Amari's Rufli says occupancy levels have softened across the group, with an increasing level of short-term cancellations.

"It would appear that the SARS virus is perceived as a greater risk than the Iraq conflict," he says.

Although average room rates have not been affected so far, Rufli fears that the tremendous pressure could lead to a rates war.

"It is possible that, in the short to medium term, the market will adopt a more aggressive rates strategy in order to secure occupancy, thereby causing a decline in ARR," he says.

Despite the fact that forward bookings in terms of daily reservation transactions and new group requests for the coming months are down, Rufli says requests for Q3 are "ongoing".

Accor hotels in China, Hong Kong, Singapore and Hanoi have been hard hit by the double impact of SARS and the war. Hanoi has suffered the most, with more than 4,000 room nights cancelled.

According to a company spokesman, the situation in China, Hong Kong and Singapore "is not as clear, but the best estimate is that 80% of cancellations have been due to SARS".

The impact in Hanoi has also hit the Swiss-Belhotel-managed Hanoi Horison Hotel, according to president Gavin Faull.

"Our hotels in China are OK except, of course, the Pavilion in Shenzhen which has been dramatically affected."

Hotels in Shanghai, usually cushioned from the effects of global or regional disturbances, are also beginning to see a drop off in business, although nowhere near as much as in some other parts of China.

The Portman Ritz-Carlton, which is currently achieving an occupancy in the mid to high 70s, has received "more postponements than cancellations", according to PR director Michelle Wan.

Elsewhere in the region, Ritz-Carlton is feeling the effects of cancelled flights.

"Like all of the hospitality industry in Asia Pacific, we are impacted by this situation, particularly since the airlines have cut back or cancelled their flights," says a company spokesperson.

"Many people are postponing their travel, and we are working with each group and individual personally to determine opportunities for rebooking."

The biggest impact for Starwood has been felt more in key gateway cities, rather than secondary destinations, although the group has received a number of requests to reschedule events either to other locations or to other dates.

A spokesman for the Peninsula Group says long-haul travel has been most affected, with "a mix of cancellations and postponements of bookings". According to Arthur Kiong, DOSM of the flagship Peninsula Hong Kong, occupancy for March was likely to drop between 20% and 30%.

It's a similar story in most parts of the region. Singapore arrivals fell by about 9% in March. According to Deputy Prime Minister Lee Hsien Loong: "Businessmen are teleconferencing rather than travelling, while hotel occupancies and forward bookings have dropped sharply."

Hoteliers in Indonesia have seen occupancies quickly tumble by about 10% - which is faster than the dive caused by the Bali bombing last year, according to Yanti Sukamdani, chairman of the hotel and restaurant association.

In Taiwan, hotels are seeing a fall-off in highly lucrative Japanese tours, although occupancies are still averaging about 70%.

Industry analysts in Malaysia are predicting that tourism arrivals will drop to 12.9 million this year, from 13.3 million in 2002.Occupancy at the exclusive Pangkor Laut Resort has dropped to 35% following cancellations mainly by European and Japanese visitors.

Meanwhile, several hotels have already begun cutting rates, including the 5-star Mutiara Beach in Penang, which is offering deluxe rooms for US$76 instead of the usual $92.

According to the Tourism Authority of Thailand (TAT), about 50,000 visits have been cancelled between April and June, and hotels are experiencing cancellation rates between 5% and10%.

A spokesperson for the Dusit Thani Hotel in Bangkok said up to 50% of foreign bookings had been cancelled, although regional arrivals remained stable.

The Amari Watergate Hotel reported 30 cancellations, and was managing to hold occupancy at 60%, while the Sukhothai was achieving 57%.

According to the Indian Express newspaper, foreign arrivals in India dropped by 50% in the first two days of the war, with airport hotels being hit the hardest.

And, true to form, the Philippines Tourism Secretary has told the tourism sector to continue promoting the country as a vacation destination and to ignore negative travel warnings. [Sometimes, it appears, ignorance really is bliss.]

Despite the undoubted seriousness of the SARS outbreak and the impact of the Gulf war on international travel, the hotel industry in Asia Pacific is nothing if not resilient.

More than any other region, it has learned the hard way the art of survival against the odds.

It may be down on its knees right now, but it always comes up fighting fit.

HOTEL Asia Pacific is Asia Pacific's leading trade magazine for hospitality training, education and recruitment - Its regular columns on the challenges and opportunities of working in the industry are essential reading for hotel professionals at all levels. Whatever your career path, HOTEL Asia Pacific is just the job.