Asia Pacific Tourism starts to buckle under pressure
London, The impact of the current global economic crisis has reached Asia Pacific and the tourism industry is starting to feel the pressure as growth starts to slow. New analysis by Deloitte, the business advisory firm, shows that although hotels have reported positive growth for the year-to-August 2008, with revenue per available room (revPAR) up 13.2%, on closer inspection, hoteliers have started to feel the strain over the last few months.
This trend is echoed in India which was achieving over 20% revPAR growth at the beginning of the year. RevPAR has dropped progressively each month and is currently in negative territory, down 3.4% during the month of August. On the flip side, Indonesia is one of the only countries bucking this trend achieving double-digit growth each month this year as it continues to recover from the terrorist attacks in Bali during the first half of this decade.
Across the globe, a decline in consumer confidence has meant many people are tightening their purse strings as they have less disposable income to spend on travel and leisure. According to the MasterCard MasterIndex of Consumer Confidence, consumer confidence in Asia Pacific for Q2 2008 was reported at 56.0, compared to 69.3 for the previous period. While these results still show some consumer optimism, the marked downturn will only get worse as the events over the past couple of weeks take their toll. A heady cocktail of the financial crisis, falling equity markets, ,high oil prices and the threat of inflation is taking its toll on corporate travel budgets. This will translate into challenging corporate rate agreements for 2009 which are typically finalised in November. There will inevitably be pressure to reduce room rates.
The International Air Transport Association (IATA) reported that in the month of August alone, airlines in Asia Pacific saw a 3.1% contraction in the number of international passengers, off the back of a 0.5% drop the previous month. These results, coupled with the deceleration in hotel performance across the region, make it clear that economies in Asia Pacific are starting to feel the impact of the wider economic meltdown across the globe.
Commenting, Alex Kyriakidis, Global Managing Partner of Tourism, Hospitality & Leisure at Deloitte said: “Asia Pacific is by no means decoupled from the uncertain and volatile economic environment in the US and Europe, and although the backlash for the Asia region has been delayed, it was inevitable. The collapse of the Asian Stock markets this month will inevitability lead to the same pressures the hotel industry is facing in the USA and Europe where revPAR growth has slowed year-to-August 2008 to 1.0% and 12.6% compared to the same period last year.”
“Looking ahead, the coming months may prove to be a challenging time for hoteliers across Asia Pacific as the economic crisis unfolds. Hoteliers will need to consider how they will respond if occupancy levels fall further. The inclination in tough times is to respond by cutting prices as was the case during the SARS crisis. At that time, like now, the emphasis is on cost reduction while continuing to meet guest expectations.”
The top three and bottom three cities by revPAR growth in Asia Pacific Year-to-August 2008
Source: STR Global HotelBenchmark™ Survey
All analysis in US$.
Mastercard MasterIndex of Consumer Confidence – The index has a range of 0 – 100. A score of 50 denotes a neutral situation, while anything about 50 denotes optimism.
Next week, the Hotel Investment Conference Asia Pacific is taking place in Hong Kong - the most pre-imminent conference of its kind in Asia Pacific. Alex Kyriakidis, global THL Leader for Deloitte is leading a panel of CEOs on The Hotels Leaders Forum. This will be the most high profile of the discussions taking place at the event.
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