Asian hotels press ahead with expansions despite pandemic

SINGAPORE/TOKYO — As flagship hotels go, the 190-room Four Seasons Tokyo at Otemachi sparkles like any other in the luxury hotel chain’s collection.

But instead of a cavalcade of guests swarming the five-star property on the scheduled July 1 opening day — three weeks ahead of the intended start of the 2020 Olympics — its marble-clad lobby will likely be eerily empty.

“We understand that there will be a big impact from the drop in the number of inbound tourists coming to Japan due to the coronavirus and the postponement of the Olympics,” hotel spokesperson Mitsui Fudosan told the Nikkei Asian Review. “But we will not change the opening day.”

Despite the international travel industry facing one of the biggest crises in its history, hotel operators across Asia including France’s Accor, Thailand’s Centara, Singapore’s Far East Hospitality and U.S.-based Marriott International, are pressing ahead with expansions originally timed to coincide with the staging of summer Olympics in Tokyo and fueled by the ever-rising tide of Chinese tourists.

Prior to the coronavirus outbreak, Japan’s government had set a target of attracting 40 million foreign visitors in 2020, bringing in an expected 8 trillion yen ($74 billion) in spending.

And with Chinese tourists already spending over $100 billion a year on international tourism, the United Nations World Tourism Organization was predicting that by 2030, China would account for over a third of all international tourism.

Numbers like that help explain why some of the world’s biggest operators such as Accor are betting so big on Asia, with the French hotel group adding a total of 20,000 rooms to its portfolio this year, with two new hotel openings in Japan, more than 30 new hotels in Southeast Asia, and a staggering 94 new hotels in China.

“With Chinese travelers spending more than anyone, we have therefore made the Chinese market a key priority and created services with Chinese guests in mind, including ensuring we have Chinese-language staff and collaterals in our hotels, Chinese menus and Chinese media,” said Michael Issenberg, chief executive of AccorHotels Asia Pacific.

While Issenberg declined to comment on whether the coronavirus pandemic would force the delay of some hotel openings, he said the company’s first priority “is the safety and wellbeing of our guests and staff. We are closely monitoring the Novel Coronavirus outbreak and have instructed our hotels to implement measures to minimize risk of transmission.”

Markland Blaiklock, Deputy Chief Executive of Centara Hotels and Resorts told Nikkei that his company will be spending close to $340 million on refurbishing existing hotels and other projects under development this year.

“We do not anticipate this situation impacting Centara’s growth plans in any way, nor any of our new property openings in 2020, of which there are 8 scheduled,” said Blaiklock. “This is an exciting year for Centara with hotels set to debut in Myanmar, Laos and Dubai as our international network continues to expand, in line with our growth strategy. This is in addition to further openings domestically in Thailand, as well as in Qatar.”

Singapore hotelier Far East Hospitality, which will add more than 700 rooms in key markets including Vietnam, Japan and Australia, is also pressing ahead with its expansion plans.

“The openings are still on track despite the current outbreak situation,” Far East’s Chief Executive Arthur Kiong told Nikkei. “We truly put our people first by taking care of their well-being, especially during a crisis when they need help the most. Our approach is to engage and educate our people to help allay any fear they have and to uplift their morale during this down time.

Singapore’s iconic Marina Bay Sands hotel overlooks a near empty Merlion Park. Almost entirely dependent on international visitors, the city-state’s tourism industry will be among the hardest in Asia by the onset of the coronavirus pandemic.

  © Reuters

RedDoorz chief executive officer Amit Saberwal said that while the coronavirus outbreak would affect the company’s business, particularly in Singapore which is so reliant on inbound travellers, he is hoping that sophisiticated domestic travel ecosystems can support other markets in Southeast Asia.

“Even with all of these different factors at play, our regional expansion plans haven’t been drastically impacted as we have always taken a methodical approach to growth by assessing the market thoroughly and laying the relevant foundations in the new cities and countries we plan to launch in,” said Saberwal. “We will continue to monitor the situation but as with other crises, like SARS, it will be a matter of time before travelling sentiment picks up again.”

While hotel operators have some rough times ahead, particularly in countries that have a high percentage of Chinese tourists, Sheryl Kimes, an emeritus professor of operations management at the Cornell University School of Hotel Administration and a visiting professor of Analytics and Operations at the National University of Singapore business school, believes the industry will ultimately survive.

“Yes, expenditures will slow down for a bit, but given that Chinese travel will be back once this situation is over, I don’t see this having that much impact on development plans,” said Kimes. “That being said, given that coronavirus is rapidly spreading throughout the world, it’s no longer just a problem of the Chinese not traveling anymore.”

Rengy John, managing partner at Singapore-based BLINK Design Group, an architectural firm founded in 2006 that specialises in hotel design, said hotel operators could use the current downtime to improve its services and speed up renovation works and implement staff retraining programs.

“As businesses and the government continue to work together to rejuvenate the economy, hotel occupancy will definitely make a quick recovery,” said John.

Still, as the spread of the coronavirus impacts the entire Asian region, Jane Wang, chief marketing officer at Los Angeles-based travel agency Sublime China, expects the global tourism sector will be catastrophically impacted by the coronavirus crisis.

“In essence, the coronavirus has decimated the Chinese tourism boom,” said Wang.

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