Singapore's hotel sector is expected to take a significant hit from the Covid-19 outbreak in the short-term and recover just as quickly as after Sars in 2003. Operators in Hong Kong, however, may not be that lucky and will have to wait until the social unrest is resolved, according to analysts.
Christine Li, head of research for Singapore and Southeast Asia at Cushman & Wakefield, said the disruption from the outbreak on Singapore's hospitality industry is expected to be short-lived even though the impact might be deeper in the near term.
William Cheng Shun-ho, chairman and CEO of Magnificent Hotel Investments, felt the time taken for the hotel sector to get back to normal in Singapore and Hong Kong would vary.
"The recovery of Singapore's (hotel industry) will be faster than Hong Kong's because they are less dependent on China," said Cheng, whose company owns nine hotels, including Best Western in Hong Kong.
Chinese tourists accounted for 78.3 per cent of the 55.9 million total visitors to Hong Kong in 2019. In comparison, they made up about 20 per cent of the 19.2 million visitors to Singapore last year.
Both cities will see reduced visitor flows from China at least in the first half, as measures including a travel ban on people from the mainland have been put in place, to contain the spread of the coronavirus that has so far claimed 2,010 lives and infected some 75,000 people.
"So overall hotel revenue per available room (a key profitability measure) in Singapore is expected to come under downward pressure in the first half of the year," Li said.
Govinda Singh, executive director of valuation and advisory services at Colliers International, agreed. He warned that "if the outbreak lasts anywhere between three and six months, room occupancy could fall by at least 10-15 percentage points to about 65 per cent (in Singapore)".
Occupancy in the city-state dropped to 82.3 per cent in January versus 83.2 per cent a year earlier, while in Hong Kong it slid to 56.1 per cent from 89.5 per cent, according to data from STR, a data and analytics specialist.
The Singapore government announced a slew of measures in its budget on Tuesday to deal with the epidemic and soften the blow on various industries, including tourism. The government said it will set aside S$6.4 billion (US$4.6 billion) for the initiatives. Of this, a total of S$5.6 billion will be used to help mitigate the impact of the virus on businesses and jobs.
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Others are optimistic that Singapore's hotel sector would bounce back rapidly, comparing it with the Sars (severe acute respiratory syndrome) outbreak in 2003.
Corey Hamabata, senior vice-president at JLL Hotels & Hospitality, said the disruption to the Singapore and Hong Kong hotel sector was short-lived during Sars and the same could be expected should Covid-19 be contained.
"Demand for hotel rooms can rebound quickly once the virus is eradicated and travel confidence resumes, with recovery in visitor arrivals and hotel occupancy rate following closely behind," Hamabata said.
Just 60 days after Singapore was declared Sars-free in May 2003, hotel occupancy quickly recovered, exceeding the 70 per cent level in July that year, according to data from Singapore's tourism board. By October, the average occupancy rate was 75.7 per cent, surpassing the 12-month average preceding Sars.
In Hong Kong, hotel occupancy rates rebounded quicker than in Singapore after Sars was contained. They exceeded 70 per cent one month after the city was declared Sars-free on June 23, 2003, according to data from the Census and Statistics Department. By August, it was 88 per cent, surpassing the pre-Sars 12-month average of 84 per cent.
But the recovery of Hong Kong's hospitality sector after Covid-19 will not be as straightforward as the city is yet to return to normal after months of anti-government protests.
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Tourism sector lawmaker Wayne Yiu Si-wing said that Hong Kong's hospitality industry would take longer to recover than it did after Sars, when many businesses worked together to rejuvenate the economy.
"Under the current societal atmosphere after the anti-extradition bill protests, people seem to have taken a much more passive approach towards stimulating the city's economic recovery," said Yiu. "My worry is that even after the epidemic is over, will Hong Kong people work together to drive the economic recovery of the city, like we did in 2003 after the Sars outbreak?"
But Magnificent Hotel's Cheng was even more pessimistic, noting that the impact of the coronavirus outbreak combined with the protests on the city's hotel industry was much more serious than Sars back in 2003.
Cheng said that it will take at least a year for the industry in Hong Kong to recover, and till such time "most operating businesses should seriously consider cutting their expenses by at least half".
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