The hospitality industry, much like other affiliated businesses (airline and cruises), is generally the first to get impacted by any global catastrophe and the last to recover.
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The coronavirus outbreak that showed its first signs in December last year was declared an international health emergency by the World Health Organization on January 30. Initial indications are that tourist destinations that are traditionally visited by the Chinese travelers are the worst affected, especially as Chinese New Year holiday traffic was cancelled in large numbers. In 2019, China predicted around 166 million outbound travelers, many of whom travelled during the Chinese New Year. This, in 2020 will not be the case, other than a few travelers who already had started their journeys.
Top 10 outbound tourism destinations for Chinese Travelers in 2019
- Vietnam
- Thailand
- Japan
- Indonesia
- Singapore
- Malaysia
- Hong Kong
- Philippines
- Cambodia
- Macau
While not making it to this list, smaller countries like The Maldives, Sri Lanka, Fiji, etc. also get a significant percentage contribution of tourist arrivals from China, albeit the actual number is much smaller. Take for example The Maldives, where the Chinese accounted for 16.7% of the tourism market share, making it the top contributor in 2019. Per the Tourism Ministry, total tourist arrivals for the period Feb-Apr 2019 was 494,540 that translated to 3,008,176 bed nights. This is expected to go down by at least 30% in 2020 due to the coronavirus, which in turn will reduce the total bed nights by over 900,000. Assuming an average daily rate of US$600 means that collectively, the loss of revenue for hotels in The Maldives will be in excess of US$540 million for this period alone, and this is then just one country. The figure below indicates how coronavirus is impacting travel across the globe.
Figure 1: Impact of Coronavirus
Source: ForwardKeys
However, it’s not just the Chinese outbound traveler we need to be concerned about. Global business travelers are holding off travel to Asia unless absolutely necessary, especially to destinations traditionally visited by the Chinese. Singapore, Mumbai, Dubai, Kuala Lumpur are all impacted, and we hear from hotels that bookings are being deferred or postponed for at least the next couple of weeks.
So, what is the solution, and is there something we can do to mitigate losses?
For now, we have three simple suggestions:
1.My advice to hoteliers, and in particular, to the sales teams out there is that they need to think and act rationally. First, let’s get some basic understanding of the situation. The coronavirus outbreak is a unique one-off incident and as such needs to be treated in context. Dropping room rates drastically as a knee jerk reaction is not going to improve the situation, particularly if you are in a business location.
If you need proof of this theory, note what hotels in Hong Kong have done over the past six months in the face of protests. Most hotels had their occupancies go off the cliff but still decided to hold on to their rates. The idea being that people who were coming to Hong Kong needed to be there anyway and it was not because they got a hotel discount.
2. The second recommendation I would like to make is both to the industry at large as well as to the respective governments. Nations like India, Indonesia, and Thailand should be looking sharply at domestic tourism that has time and again increased the resilience of the industry in the wake of global adversities.
A case in point, back in 2003, when SARS hit the region, unfortunately coinciding with the Iraq war, most Indians chose to travel domestically rather than overseas. This was a turnaround year for Goa, which until then had been a seasonal tourist market. It also fueled domestic tourism in a very big way in the country. Hence, governments can perhaps give tax concessions to encourage local travel and stay. After all, the Travel & Tourism sector employs one in every ten people, and governments can ill afford to let them be bystanders.
3. Finally, let’s stop all the insensitivity towards Chinese tourists.Till recently, most tourism and hotel professionals were dying to get a piece of the Chinese pie; however, in the past week, in countries like South Korea, signs have begun popping up on restaurant and hotel windows saying, ‘No Chinese Allowed’ and a casino in the country has stopped accepting Chinese visitors. Similar cases are being seen in Japan too. This is not limited to Asia alone; a French regional newspaper called it the ‘yellow alert’, which is outright racist, considering the xenophobic term ‘yellow peril’ was used for the people of East Asia dating back to the 19th century. In Denmark, the country’s Jyllands-Posten newspaper published an editorial cartoon depicting China’s flag with virus symbols in place of stars on the red background.
We believe that as reputable and respectable hotel brands, turning business away or any phobia against Chinese tourists will tarnish the goodwill in the long run. One must not forget that business is a numbers game and with Chinese travel, the numbers do make a huge impact. They will be back sooner than you think. Hotel brands should instead have set policies and corporate directives to tackle such sensitive situations to ensure that Chinese tourists do not feel harassed. Operationally, the resort/hotel doctor needs to be equipped with the necessary means to deal with such situations and the management must make it mandatory for the tourists to report to the nearest hospital instead of causing mass hysteria.
Finally, one hopes that this challenge too will be overcome sooner than later. We all live in a fragile world and we should not be throwing stones from a glass house.
For more information, please contact Manav Thadani at manav@hotelivate.com
