Travel is back - bigger and better than before

Singapore

2021 was, by some metrics, a record year for Hilton's Asia Pacific operations. The multinational hospitality company signed deals for 247 new hotels and opened 100 new hotels that year for this region alone.

"For the industry and particularly Hilton, we had a record year of growth. Those two stats are the highest we have ever done," said Hilton's APAC president Alan Watts. In 2020, the group signed deals for 169 new hotels and opened 79 new hotels.

"Hilton signed more hotels compared with other brands and it shows investor optimism and the strength of Hilton's brands."

There is much for Hilton's leadership team to feel chuffed about. On a global level, Hilton opened more than one hotel each day in 2021. For the full year, it opened 414 new hotels across the globe.

Within Asia Pacific, they opened a hotel every 4 days on average.

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This was achieved despite the severe blow dealt by Covid-19 to the hospitality industry. As noted by hospitality-focused analytics firm STR, the hotel industry is generally the first industry to take a hit when there is a crisis.

Covid-19 hit the industry particularly hard. In a November 2020 report, STR said the pandemic was impacting the industry at "much deeper levels" than the 2009 recession. Asia Pacific specifically saw a slowdown in the early days of the pandemic as China closed its doors.

By 2021, however, there was a general sense of optimism. In a white paper looking at hotel performance for the year, STR found that "much of the Asia Pacific region continued to show the ability for quicker recovery and more V-shaped returns".

It was a better year for Hilton as well. In its 2021 full-year results, Hilton's overall occupancy (across all its brands globally) was 57.2 per cent, versus 16.9 per cent in 2020. Within Asia Pacific, 2021 occupancy was 50.5 per cent, compared with 6.0 per cent in 2020.

On the segments which did reasonably well throughout the pandemic, Watts cited countries which were able to depend on domestic tourism and luxury accommodation.

"It sounds like converse logic, but markets that have strong outbound travel and limited inbound travel can do as well as, if not better than, when their borders are closed and domestic travellers are forced to stay within their borders," said Watts.

STR's data confirms this view. In 2020, STR said "green shoots" of hotel occupancy recovery were evident across the region. China in particular was "trailblazing the path" due to a historically strong reliance on both business and leisure-based domestic travel.

By August 2021, STR found that Mainland China was already at 2019 performance levels. In a report issued then, they noted that hotel occupancy levels were between 70-80 per cent in the last few weeks of July.

Watts saw a similar trend for countries with large domestic markets.

"(Besides China), Australia is another good example. Australians love travelling to South-east Asia so when their borders were closed, they rediscovered Australia and domestic leisure destinations boomed accordingly. The same can be said for Japan," he said. "In times of crisis, there is safety in big populations with high disposable incomes."

Another sector of the market that has done well throughout the pandemic is luxury.

In the Maldives for instance, their Waldorf Astoria Maldives Ithaafushi has benefited from pent-up demand. The Maldives was one of the first countries to reopen its borders to all travellers from July 2020.

"The average night for the Waldorf Astoria in the Maldives in January topped US$5,000 per night. Now, that's an uber-luxury property that trades at high rates, but this gives an indication of how much pent-up demand there is," said Watts.

"(There is, for most people) two years worth of pent-up leisure demand and savings. So when people start to travel they are doing two things - they are staying longer and they are buying up an experience," he said.

On its luxury front, Hilton currently operates 32 hotels across its Waldorf Astoria, Conrad and LXR brands in Asia Pacific, with a further 18 hotels in its development pipeline, due to open over the coming years. In terms of their overall supply and pipeline within Asia Pacific, they have 523 trading hotels and 760 hotels in the pipeline.

"The Waldorf Astoria Maldives Ithaafushi was opened in 2019 and it unveiled Ithaafushi - The Private Island, the largest Maldivian private island spanning 32,000 square meters in 2021. Hilton announced the signing of a fourth resort in the Maldives - Hilton Maldives Amingiri - in June the same year." (See Amendment note)

It is not just in the Maldives that Hilton is betting big on the luxury market.

In November 2021, they announced they had concluded 2 landmark signings - for the first Waldorf Astoria hotel in Osaka, Japan, and a Conrad hotel in Chongqing, China.

This was on the back of launching their newest luxury brand, LXR Hotels & Resorts in Asia Pacific, with the opening of Roku Kyoto, LXR Hotels & Resorts.

"The other trend that we're seeing as business travel comes back, is 'bleisure', which is business and leisure. Business travellers used to come in on an overnight flight on a Sunday and then fly out on the overnight flight on Thursday.

"Increasingly, because travel hasn't been as frequent, business travellers are staying the weekend. They are bringing their partners with them or they're telling their kids to fly into the destination and stay the weekend," said Watts.

Even as business continues to pick up, industry watchers say this is still early days of the recovery: 2023 and 2024 are expected to be boom years for travel.

Earlier this month, the International Air Transport Association (IATA) said it expects overall travel numbers to reach 4.0 billion in 2024, exceeding pre-Covid levels.

For Watts, 2023 will likely be the year that pent-up leisure demand coincides with a full year of budgeted business travel, followed by international group travel.

"I think most of Asia is going to feel really normal by Q3 2023," he said.

"In the short term, watch out for leisure to any destination that's open," he said, noting that Singapore is "largely open for business", having announced more vaccinated travel lanes (VTLs) and the renewal of the Formula One deal until 2028. Singapore also just hosted the Singapore Airshow in February this year.

In February this year, Hilton opened the Hilton Singapore Orchard, the company's largest hotel in Asia Pacific. The 1,080-room property will, he said, set a new benchmark of hospitality with its dining experiences and extensive meeting spaces.

Amendment note: The Waldorf Astoria Maldives Ithaafushi is a Hilton resort that opened in 2019. The Maldives private island was unveiled last year.