Several of the world’s largest hotel chains are looking toward China to be their major growth engine in 2023, as Chinese travellers return both domestically and abroad after three years of Covid-related lockdowns.
“You’re already starting to see significant travel within China in terms of uptick,” said Hilton CEO Chris Nassetta on a company earnings call this month.
Stay up-to-date by following FMT’s Telegram channel
“We expect particularly, in the second half of the year, you’re going to have a big tailwind from that,” he said.
Four of the five largest hotel groups in the world by number of rooms – Marriott, Hilton, Wyndham, and Intercontinental – posted strong end-of-year earnings for 2022, with confident growth forecasts for 2023.
Marriott, the world’s largest hotel company, reported a US$2.4 billion net profit for the year, more than doubling from US$1.1 billion in 2021.
Wyndham recorded a US$355 million net profit, compared with US$244 million in 2021.
While the sharp rebound in post-pandemic travel will taper off in 2023, and broader global economic concerns loom, company outlooks remain optimistic.
Marriott forecasts its annual growth in RevPAR – a key industry metric measuring revenue per available room – to be between 6% and 11% in 2023, and RevPAR in the first quarter of this year alone to grow 30% to 32% over the year before.
Hilton is forecasting 4% to 8% growth in RevPAR for 2023, and Wyndham projects 4% to 6% of RevPAR growth.
Last year’s growth was fuelled largely by the surging American travel market, which recovered to 96% of its pre-pandemic levels, according to the US Travel Association.
But as the rebound in travel demand levels off in the US in 2023, the rest of the world, in particular China, will be expected to drive continued growth.
Marriott forecasts RevPAR growth of 6% to 11% worldwide.
The figure jumps to a 12% to 18% growth forecast when excluding the US market, with a 47% to 49% year-over-year growth projection for the first quarter of 2023 alone.
In greater China, chief financial officer Leeny Oberger expects RevPAR to increase “over 30%” in 2023 from 2022.
Though industry occupancy figures are generally below peak levels before the pandemic, higher prices due to increased demand mean industry revenues are at or exceeding 2019 levels for many hotel chains.
“We believe there’s still further upside in 2023, especially now that China’s borders have reopened,” said Marriott CEO Anthony Capuano on the company’s earnings call this month, noting that all regions except China have more than recovered to pre-pandemic levels.
Though international flight capacity to and from China still lags, the return of Chinese tourists abroad will also have major ramifications for the hotel industry in the region.
According to Marriott, more than 40% of room bookings in the Asia-Pacific region came from Chinese travellers.
“We’re already seeing and hearing from our teams in South Korea, where we have over 10,000 rooms, that they’re seeing more Chinese arrivals,” said Wyndham CEO Geoffrey Ballotti.
“Thailand, Indonesia, Australia, Singapore, those are all big, big beneficiaries,” he said.
And soon US destinations such as San Francisco or Hawaii could once again be welcoming throngs of Chinese tourists.
“We’re just starting to hear rumblings about the return of the Chinese traveller to some of the larger US cities. I think it’s really early to have any kind of measurable impact but it’s starting,” said Smedes Rose, a lodging and real estate analyst at Citibank.
Broader macroeconomic concerns about the economy still loom, and some business travel such as large-group revenue for things like conferences is still lagging compared to individual bookings, but the recent surge in Chinese New Year travel within China shows the kind of pent-up demand for the world’s most populous country.
On Tuesday’s earnings call, Intercontinental CEO Keith Barr said trips taken during Chinese New Year reached nearly 90% of 2019 levels.
“That just shows how quickly this business can bounce back,” he said.
Source : Free Malaysia Today
