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Hi, everybody. Welcome to the Hotel News Now podcast. I'm Sean McCracken, news editor for Hotel News Now here with STR's Jesper Palmquist. Jesper, what's what's new and interesting across all of Asia Pacific this month?
Speaker 2:Well, as we close the, hi, Sean. Thanks for that. As we close the, 3rd month, the the Q1 of the calendar year, In one way, it's more of the same, but we're also moving between it's a lot of shoulder phases, so between peak and low seasons for a lot of markets. Obviously, when we're at macro level, we're, we're still looking at some occupancy levels and demand levels in tourism and in hotels still on the table. The rate, that has been such a story for everyone and the pressure and people spending more that great growth is still slowing down.
Speaker 2:It looks like Asia Pacific now we're overall at about, about just north of 10% above 2019 levels. So we see a huge mix behind that, with some highs and lows, but that is, you know, starts coming down that growth pace, right, and and the difference. Profit margins keeps improving, but at a slower pace. So I think we found, reasonable balance in March as well where people maintain their cost another month. And that was always a tricky month because in some of those, some of the key markets, March is a soft month.
Speaker 2:Not too many events, and it's post, say, Taylor Swift things for some markets. Right? So then you come in and so it was important to see the profit margins hold up and and and cost. And we're otherwise, we're working through it's another month of a lot of release and new rooms. Right?
Speaker 2:24 is the last peak year of new supply in across Asia Pacific. So that puts that pressure, important on it. But if there was one key story that I've been hearing more about from countries, and that could be hotel associations, from governments, tourism boards, and hotel groups, is I wonder if something happened in terms of how they compare. Because countries would say, like, oh my god. The rate is too high.
Speaker 2:Kind of pop it back up again and how it's just me, which is so not true.
Speaker 1:Yeah.
Speaker 2:Right? Because this is a global phenomenon in most countries that rates are higher than when you look 5 years ago, which makes sense. But Yeah. I think there's been more of that voice saying, like, oh, this is bad, and you need to do a sense check and drill down. What is it really?
Speaker 2:So I've heard more on that this month.
Speaker 1:Is that concern that people are kind of pricing their selves themselves out away from travelers?
Speaker 2:I think there's there's there's 2 parts to that concern. 1 is from, say, other stakeholders, authorities, and maybe a bit of owners, and that kind of stuff. Like, are we as a market and a destination being priced out? We are being noncompetitive. Take and the other cases, of course, are telling, like, I'm I'm operationally, can we push this high enough, etcetera.
Speaker 2:But in the first case, look at Japan. Low yen for a long time now, super high rates. But it's easy then to go on the story. And we costar we've been on on, news in the last few weeks, and the story is high rates. Look at that over the, obviously, the big holidays being the, the sakura, the cherry blossoms that were, right, in in some of those special places, it tells fully booked and crazy high rates.
Speaker 2:But so much of that is in the big three, Tokyo, Osaka, and Kyoto. So any American that goes to Japan is, of course, gonna hit those 3. It makes sense. Now the government wants you to visit 10 other cities, and maybe you do, but those are gonna be the popular ones. The rate growth in the regional markets is much different, is much lower and more sense.
Speaker 2:Right? But I can see why it's scary. At a country level, rates are up by 20% versus last year, so not 2019. That's that I get it. I can look at it.
Speaker 2:Tokyo is 30% higher than last year in rates. Mhmm. That is international travels coming up. It means domestic travelers with a weaker yen, they don't struggle for sure.
Speaker 1:Yeah.
Speaker 2:But you could argue market forces at play. Right? And as long as people pay, we're good. And if you compare that to other countries back to the previous point, let's not cry wolf just yet, I would say.
Speaker 1:I mean, I'm not an expert on traveler psychology, but, I mean, wouldn't it seem to hotel rates are not the only thing that would limit somebody from taking a trip to Japan, right, in my estimation. Right? I mean, that
Speaker 2:It never you know what? It never was, And I think that's maybe what you need to rebrand this podcast to. Travel psychology with Sean McCracken, because I think you are. You take it down, and I'm going to do it myself. That's well, maybe that's another thing.
Speaker 2:That's a new version of this. In Japan, listen. First time I went to Japan was, 30 almost 30 years ago, and it always seen as an expensive country to go to
Speaker 1:Yeah.
Speaker 2:For most people. You gotta figure out the Shinkansen and the bullet train, everything gets expensive. People know, but they go there anyway because of all the other reasons. And now the hotel rates in those key cities are more expensive. So you budget for that, but the yen is weak.
Speaker 2:So, it doesn't feel that much for European or American.
Speaker 1:Yeah. For sure. So, this is, kinda completely off base from what we were just discussing, but I just wanted to ask you since we spent so much time last month talking about India, and I spent last week in Europe at the IHIF conference where there's a lot of discussion about the impact of elections across Europe, across the US. Obviously, India's got a big election coming up. How how big of a deal is that for hotels and hospitality?
Speaker 2:Small. And if you look at any my my usual statement is, like, any geopolitical impact on travel tourism and hotels. Let's drill it down. So, like, on hotel performance has very small impact unless it really impacts because then it really, really impacts, and that's still the case. So this year is, of course, election year galore around the world and so many places, India and Indonesia.
Speaker 2:We know from history that elections don't have a big impact on this. Now what happens? Now what is the impact? Well, the impact is it changes because in large the largest democracies in the world like India and Indonesia are. They you have more government business that goes to meeting space, that goes to those key cities in provinces and regions where they're needed to do those meetings, etcetera, and that we know that, and we can forecast that and it doesn't change the entire dynamics of a country.
Speaker 2:It doesn't. And Mhmm. We don't expect that either in our forecasting that we look at those particular countries that we're we're not gonna and for me, that's the same thing as conflicts or war. Right? So the Ukrainians, the war on from Russia on Ukraine has been the same thing for 2 over 2 years now.
Speaker 2:The impact here, we talked about that last month, it's the flights. Right? And how they need to fly longer. Middle East in conflict right now, we're not forecasting huge impact on Asia Pacific markets for that.
Speaker 1:I was gonna ask you about that specifically in the airlift implications of of European to Asia travel. Is it's not a big deal?
Speaker 2:No. It's it's not a huge deal. And I mean, because when you look at it, from the airlift that we had that we're still missing a gap. Right? Middle East was is an important hub for Asia Pacific to go back and forth for sure, but you also have a lot of direct flights in there.
Speaker 2:And now the bigger impact was, of course, Dubai and the great floods in the desert that happened. That had an impact. So I think not yet. And if this continues to be deescalated, which maybe seems to be the thing politically right now with other parties in the moment of conflict, I I think we should be fine. So we usually see less impact on hotels, but it's something that we obviously need to check and and sense check around the market, but nothing yet.
Speaker 2:And listen, South China Sea, same thing. Philippines and the US are running and doing one of their big military, trainings and and activities, which China thinks is a bad idea, doesn't have an impact on hotels, at the moment either. Right? So so those those things we we track and we we're not seeing anything until it really does. Right?
Speaker 2:It's more and and that's why we can't compare that to natural disasters, right, which has a direct impacts right away. The volcanoes that have erupted obviously in Indonesia and some of the floodings that have happened in other markets and in China, Right? Brief in in Guangdong province. Huge floodings that have have a big impact on the Greater Bay Area, which is, no bueno.
Speaker 1:Yes. I would imagine. So, you brought up something that is not a concern I've heard in American, the American hotel industry in a while now, which is digesting outside supply growth. I wanna drill in on that because honestly, it's it's kind of a novel concept for me now because it's such a non it's such a non issue here now and it's it feels like quaint and like old to think about, like supply being an issue. Like, where where is that?
Speaker 1:And how big of an issue is it actually?
Speaker 2:Well, Sean, if you logged in to the CoStar platform and looked at the office and retail sector, you would feel right at home and and join our conversation because that's the same thing happening in
Speaker 1:the US.
Speaker 2:Right? So what we have now is we we are, like, 23 and 24, and China even a little bit more delayed moving into 25, especially in in some tier 2 cities, tier 1a half. We there's still a lot of supply that was delayed and the new organic. There are some countries and markets that will take that up and run with a slight bump in the road, but there's definitely markets where they're feeling it. And it's a continued this is straight at Melbourne.
Speaker 2:We talked about it a long time that Sydney and Melbourne, that comparison, Sydney didn't have as much. Melbourne does, and therefore, the the the performance in Melbourne is more muted, generally than Sydney because Melbourne is still eating up a lot of cool new brands and supply. Great for the future. But as of the Singapore, that's one of the key reasons why we're 5% off the pace in business on the books for the next 6 months compared to last year. We're adding, you know, the artisan, the the whatever it was.
Speaker 2:There's all these new hotels that have popped up, new como, etcetera. So we still have it, and even in some countries where it's more transactional and rejuvenation, in the same way, Japan, in China, Indonesia, and Vietnam is the maybe the biggest one. Right? And we talked about that last time about the growing occupancy now, but the, there's still a lot of supply behind there, which why that is gonna take a bit longer. But if you follow Vietnam as an example, obviously, more in the news has been, Trong Milan and the the death penalty for the the Bank of Saigon and the and and the property tycoon there.
Speaker 2:They continue to clamp down on the issues that they've been having, systemic issues of of corruption and moving in that direction. And that obviously holds back things a little bit further.
Speaker 1:Yeah. But it seems like, a clamp down in any sort of, like, lending environment in China is a fundamentally different thing than what we'd see here, obviously. Yes. They can they can turn the tap back on at will Yeah. Almost.
Speaker 2:Yeah. I mean, I think the the one difference on that conversation from last month is it continues to be the concerns don't go away with the same, like, with that argument then in China. So consumer spending is still a concern in China, and you can see it in the numbers. So people wait. It's a little bit of a dangerous game when you look at, okay.
Speaker 2:No. No. No. We got another public holiday coming up. Right?
Speaker 2:We have the big three golden weeks. And now we have the Labor Day coming up. We'll make, yes, it will do well. Probably lift Hong Kong as well and other markets. It'd be good, but can't get away from the fact that tier 1 cities, most predominantly Shenzhen and the Greater Bay Area.
Speaker 2:They're they're dragging the country down right now still Supply, rate pressure, etcetera, they didn't catch that big rate trend. Right? Yeah. But year to date, the last Q1, occupancy is slightly down year over year. March, 4% down.
Speaker 2:Rate didn't really grow in March. And the only other place that I could think of in Asia Pacific where rates didn't grow in March compared to last year is Myanmar. Yeah. So you don't wanna be on that yeah.
Speaker 1:Yeah. So that's not the country you wanna get compared to in terms
Speaker 2:of business. Not at the moment, I'm afraid. So there I would you know, people that sometimes are like, hey. China, it'll be fine. After the 2 sessions, well, a couple of months ago, we're we're still well, a month ago, we're still waiting on how that new plan will evolve and stimulate the economy, which will primarily support the the spend for domestic tourism and and retail and and everything else.
Speaker 2:Office office is still, very much, away from the landlords. It's the the tenants market, similar to US, well, for different reasons. Right? So similar. That would be yeah.
Speaker 2:There's still pressure on it throughout this quarter, I would say, until we start to see any GDP insinuations of of turnaround. Yeah. It's a big ship.
Speaker 1:Yes. It is. It is. Which is I mean, in a country living in a country that has a massive economy, I know it's not so easy to to right the ship midstream. Yeah.
Speaker 1:Now
Speaker 2:I was bringing up to our Chinese team. They they what do they call it now? Near sourcing, how the Chinese companies are putting up big shops in Mexico close to the border?
Speaker 1:Yes. You know, that's a huge. All of the everyone I speak to in Mexico, and they go down to Mexico at least once a year. That's such a huge deal for them. Like, all they wanna talk about is near shoring and how big of a deal it is.
Speaker 1:Because, obviously, they're a big manufacturing hub, but this is, like, exponential growth for for what they're trying to.
Speaker 2:Oh, like, hiring 300 people, hiring 1200 people, hiring 2 and a half 1000 people. It, yeah. Mexico has put in the sign up saying, welcome, China. Right? Yeah.
Speaker 2:But what's different with this from traditional belt and road initiatives is that within that distance and also I'd set up my understanding, correct me if I'm wrong, is that in these factories, the factories are funded by Chinese money and set up and via Chinese leadership, but I believe Mexican workers primarily. Is that true?
Speaker 1:Yes, yes, for sure.
Speaker 2:So that's a big difference, right? Because when you come in and building ports in Jalalberto, Sri Lanka or Eastern African for digging or whatever it is around the world, the Belt and Road, it's usually Chinese workers as well, which drops down into that. How do you in the receiving country, small to medium enterprises across manufacturing, etcetera, compete with the Chinese? But here, there's a different synergy. No?
Speaker 1:Yes. For sure.
Speaker 2:So is that an American worry?
Speaker 1:I've no one in America is talking about it. Like, literally.
Speaker 2:Well, they are now. Thanks to this podcast. Sean is shining his with his, like, travel psychology podcast. He's shining a light on what does this mean for the US when you got the combined forces of affordable labor for the Chinese and they're assuring the skill set and the capacity and the speed that they bring in manufacturing on the other side of the border. What does that mean for someone in Texas who is this?
Speaker 1:I mean, I will tell you, the perspective in the US on this largely has been positive. The little bits it comes up, it's it's basically a, securing the supply chain type of thing. I don't think that this the breadth of American manufacturing is such now that manufacturing has been moving south of the border in this country for a very long time. I don't think that that's a new concern is what I'm trying to say. Fair.
Speaker 1:Fair
Speaker 2:enough. Fair enough. Interesting. Well, good good to get that perspective. We moved from Vietnam, Myanmar to, Mexico in in Egypt, which is good.
Speaker 1:Well, this is a little bit closer to where I'm at, so maybe I have I can play the role of something other than the the dumb American. I can play the marginally informed American firm. So, you brought up the the impacts of the kind of weakened yen. I'm that begs the question, is currency playing a factor, in other other Asian countries? Is it is it a big deal anywhere else?
Speaker 2:That's a good question. Ian is a huge difference from the others. Mhmm. You know, on how your currency is I was gonna say pegged, but that's obviously the wrong word, but how they were relating to the US dollars. A lot of them look at the Singapore dollar, right, which has this band within which is moved, so it's keeps really closer to it.
Speaker 2:So the Singapore dollar is strong. The type bot has definitely taken a little bit of a hit, but that impacts more on an export import basis for their car manufacturing, that kind of stuff. And, also, the movements have not been as strong for the various dollars. They also the Kiwi, etcetera. And other main, and the other markets and the the rupiahs and and, for the big countries, rupees and rupiahs, India and Indonesia, the movements have not been big enough.
Speaker 2:And since they are so big domestically, it has Yeah. Decibel impact. Right? And and then again, inbound tourism is not a big deal for some of those countries, for China, India, and Indonesia. Right?
Speaker 2:So then I'd say no. Japan, the answer short answer is probably no. It's it's it's in Japan there, for that. It's interesting, the only country we we don't talk about too often, Korea, when I hear about Korea more it's it's their outbound power. Right?
Speaker 2:Koreans Yeah. Well traveled, good spenders, good what do you what do you like, how my yeah. The receipts per travel or whatever they factor in there. They, a lot of destinations and hotels, they're like, oh, yeah. And I'm back up to my levels here of Koreans and even beyond, etcetera, and people like it.
Speaker 2:That has a national cap. It's, you know, it's not China. But Yeah.
Speaker 1:It's important. It's a much smaller country for sure. But It is.
Speaker 2:But they but the percentage wise, they contribute really well to a lot of countries, and it's an important outbound market for many.
Speaker 1:Yeah. Oh, for sure. So, Q1 data in the books, most the way through April, how are you feeling about 2024? Has your outlook changed at all?
Speaker 2:Has my outlook changed based on that? No. Broadly speaking, no. There's a couple of markets where I would have expected rates to fall a little not fall, but your growth pace to slow down a bit, say, like, Bangkok that we go like, okay, March, April was a bit softer. But on a full year perspective, now it's, it ended the quarter kind of as we expected.
Speaker 2:We know we come into that Q2 where many markets will not have, obviously, in the southern southern hemisphere coming into winter, where, it'll have a different seasonality. Interesting to see the maybe one of the first years since the pandemic where we expect some really strong numbers there. But no. I I I still feel our our forecast there where where we say occupancy levels should be around in and around the, 2019 levels. Some will be behind.
Speaker 2:Now that is back off a little bit in Singapore, but overall, we have been upfront there and that high single digit or something rate growth, since 2019.
Speaker 1:Anything we forgot to talk about, Jasper?
Speaker 2:The Indianapolis no. We no. I think I think that's good because this is one of those where I would have kind of expected a little bit more change from March, but, fortunately, I stick to my guns that vanilla is good. When boring is good, vanilla is good. Forecast a little bit easier.
Speaker 2:And as we are, we're not far away from the budget conversations to 25 we're kicking off. Right?
Speaker 1:Yeah.
Speaker 2:And obviously well, in India, of course, the fiscal year ended, with this March, and that was a phenomenal year in India. Mhmm. So now they kick off and see how much will that growth in this new fiscal year and an election year. But I've so I think so far so good is kind of the headline on on what we forecasted.
Speaker 1:Yep. Just knock on wood, nothing crazy happens.
Speaker 2:Correct. Yeah. Let's see how we've rolled that past out. But I I'd tell you what, April also so far, Mhmm. Pacing the way, as as intended, where which increases the concern for some for occupancy and not comparing.
Speaker 2:Is it just me with a high rate? Mhmm. So that's a lot of conversations about that.
Speaker 1:Alright. Well, I really appreciate you taking the time, Jesper.
Speaker 2:Hey. Thank you, Sean. Good to see you again.
Speaker 3:Hi. I'm Isaac Claso, vice president of analytics at STR.
Speaker 4:Hi. And I'm Jan Faitak, national director for hospitality analytics for The CoStar Group. Tune in to our new show, Tell Me More, hospitality data podcast.
Speaker 3:It's a podcast on the global hotel industry, its current trends, what we're thinking about, and where the industry's going.
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Speaker 5:This episode of the Hotel News Now podcast was recorded on April 22, 2024 by Sean McCracken and edited by Rachel Dopp. Look for this and more podcast athotelnewsenow.com.