Impact of the Coronavirus on Chinese hotel performance

5 February 2020

Like the rest of the world, we continue to closely follow the situation around the outbreak of novel coronavirus (2019-nCoV). While the health and wellbeing of so many around the world is the primary focus right now, we also want to do our best to support our partners and answer as many questions as we can around performance and data reporting. We want to extend our gratitude to all hotel partners for continuing to provide accurate and timely data per STR reporting guidelines. This is key as we monitor and report during this abnormal period, and eventually forecast market recovery.

Latest data on Mainland China

STR analyzed historical data as well as preliminary daily data for the first 26 days of January. It was important to consider the combination of Chinese New Year in addition to the coronavirus outbreak.

• The Chinese New Year holiday week, extended by three days in 2020 to 2 February, normally produces a significant shift in travel patterns across the country with very specific hotel occupancy movements. This is due to less business travel, school closings and those who return home to spend their holiday with family. At the same time, it is normal to see average daily rate (ADR) rise to levels higher than the yearly average in the market.
• With that trend in mind, Mainland China’s occupancy reached 70% on 14 January but proceeded to fall to a lower absolute level each day thereafter. In the final day of our analysis (26 January), occupancy had dropped to just 17.0%, representing a 75% decline from the 14^th of the month. ADR began to ascend on 19 January, eventually reaching a monthly high of CNY754.48 on 26 January, which represented a 61% increase from the 19^th of the month.

 

• Historically, Mainland China’s occupancy falls to an absolute level of roughly 55% during the week of Chinese New Year. When looking at data for 24-26 January, average occupancy was down to 21.9%. ADR, usually between CNY650 and CNY700 for the holiday week, reached a preliminary average of CNY711.50. It should be noted that during the festive period, some hotels and locations experience higher than normal occupancy and ADR, and they will have seen an even bigger decline compared to 2019, in light of the outbreak.
• When measuring against comparable dates from the previous year, preliminary data for 23-26 January showed a 71% decline in occupancy and a 10% increase in ADR. As with all data included in this analysis, we are attributing the low performance to the escalation of the outbreak and partially and depending on product type and location—to the combination of Chinese New Year. We’ll provide more market-level performance in the coming weeks.

 

Potential for impact in markets outside of Mainland China

Another major difference since the time of the SARS outbreak is the volume of Chinese travel outside of Mainland China. With the coronavirus outbreak now considered a public health emergency of international concern by the World Health Organization, we’ll need to monitor markets around the Asia Pacific region and the world. However, it is still too early to identify any type of impact outside of Mainland China.

• Hong Kong and Macao see a large number of visitors from Mainland China. Hong Kong’s hotel performance has already been on a steady decline due to ongoing political instability in the region.
• According to data from Tourism Economics, Thailand, Japan, South Korea, Vietnam, Singapore, Cambodia, Malaysia, Indonesia, Australia and Philippines are the main outbound Asian destinations for Chinese travelers. Australia’s performance has already been affected by devastating bushfires in the country, as has the Philippines by a volcanic eruption earlier this month.
• Hotel performance in gateway cities in the U.S. will also be of concern with many flight cancellations and travel restrictions. Our forecast partners at Tourism Economics conducted an analysis on the potential U.S. travel impact from the outbreak. Visits to the U.S. from China could drop by 28% in 2020 and mean a loss of 4.6 million hotel room nights and $5.8 billion in visitor spending in 2020. Through 2024, those totals could increase to 8.2 million room nights and $10.3 billion in spending. The full analysis is available here: https://www.tourismeconomics.com/events-press/featured-research/