Prolonged curbs on China outbound travel could hit Asean cities' hospitality recovery: JLL

CONTINUED restrictions on outbound tourists from China could hit hotel occupancy rates in certain Asean cities by somewhere between 10 and 20 percentage points, said an Oct 21 report by JLL's Hotels & Hospitality Group, the first in a series on tourism and hotel recovery in the Asia-Pacific.

Since 2013, China has accounted for more than 40 per cent of international arrivals to the region, said the report, based on data from Hong Kong, Indonesia, Japan, Malaysia, Maldives, Singapore, South Korea, Thailand and Vietnam.

Of those markets, the 5 with the highest share of mainland Chinese visitors in 2019 were Hong Kong (78.3 per cent), South Korea (34.4 per cent), Vietnam (32.2 per cent), Japan (30.1 per cent) and Thailand (27.1 per cent).

The recovery of outbound travel from China "is a key determining factor to the recovery of hospitality markets across Asia", said the report.

But if Chinese-made Covid-19 vaccines are less effective against new variants of the virus, and China contains to maintain a zero-Covid policy, the country might keep its borders closed for longer than expected.

This would have implications for the region's hospitality recovery. JLL estimates that, for instance, Jakarta's occupancy could recover to 60 per cent of pre-Covid levels - but a prolonged closure of China's borders would reduce this by 11 percentage points.

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Similarly, the potential occupancy recoveries in Singapore, Bangkok and Ho Chi Minh City could be compromised by 14 percentage points, 18 percentage points and 19 percentage points respectively.

An even larger impact would be felt on hospitality in Hong Kong, Tokyo, and Seoul with potential losses of 50 percentage points for Hong Kong, and 23 percentage points for the latter two.

Besides Hong Kong, markets such as Tokyo, Seoul and Ho Chi Minh City would be greatly affected if China stays closed, said the report. "Arguably, a lot of the new supply that has opened in these markets cater to the growth in Chinese tourism which will be difficult to replace."

In contrast, markets such as the Maldives and Singapore are expected to maintain high occupancy levels even if China remains closed.

The Maldives benefits from other visitors that have a significantly longer length of stay, while Singapore has broader diversity in its segmentation, said the report.

"Nevertheless, resorts that have been designed to cater to Chinese tourists in either of these markets will need to reposition themselves in the short term to thrive."

The good news is that, according to the China Outbound Tourism Research Institute, the Chinese are eager to travel once Covid-19 is more under control, with a large wave of tourists expected once borders reopen.

Regional travel is expected to recover first, followed by long-haul travel.

"It is likely that China will prioritise the establishment of travel links with countries which have managed Covid-19 well in the form of high vaccination rates and the implementation of health certificates," said JLL.

It sees young travellers as driving the recovery, rather than family groups.