Southeast Asia sits at the lower end of the recovery compared to other STR-defined subcontinents, surpassing only Northeast Asia’s gains in terms of occupancy and average daily rate (ADR) in 2022. and the region’s reliance on international travel, especially of China, which has been slower to maintain international flight capacity.
According to OAG data, Southeast Asia still lacked 35% of flight seat capacity in the last week of January 2023 (compared to the same week in 2019). While that was better than the 50% gap from six months earlier, it shows both the time it takes to get air infrastructure in place and the importance of flights to the region’s tourism industry. Before 2020, China had close to 30 airlines offering many routes to Thailand with more than 17 million seats, and reactivating this capacity will take time. While carriers such as Spring Airlines and Juneyao Air Shanghai are increasing routes to northern Thailand, many international airlines are awaiting approval from Chinese authorities for more routes.
Southeast Asia ended the year with an occupancy level of 53.8%. While this was 15.6 percentage points ahead of 2021, the region remained 14.5 percentage points behind the 2019 level. ADR performance was stronger at $97.71, up 58% year over year and just 6% behind 2019.
The situation showed substantial improvements during the year as countries lifted restrictions and reopened borders. Occupancy continued to recover throughout the year, reaching 96% of 2019 levels in December. The region began to exceed the ADR 2019 in September and was 12% ahead of the pre-pandemic comparison in December.
Indonesia and Singapore led the way in terms of revenue per available room (RevPAR) recovery, in many ways thanks to occupancy recovery outpacing the rest of the region. Indonesia has been supported by the lifting of COVID restrictions and the resumption of leisure, business and group travel. Apart from Bali, which relies more on inbound travel, the country has a more progressive stance on restrictions for the first time in 2021. This enables decent demand levels led by a strong domestic travel engine, ensuring that weekday business remains far higher than that of all other Southeast Asian markets. Rapidly rising CPI driven by increased fuel costs presents some risk as prices rise.
Singapore saw occupancy at 70.7% in 2022 – 14.4 percentage points behind 2019 levels and marginally behind 2021. While the recovery has been stronger than other countries in the region, there is reason to be cautiously optimistic, as the nation state is one of the most. APAC countries exposed from a macroeconomic perspective. Furthermore, the 2023 MICE calendar is not as strong as it was in 2022, especially beyond H2 2023, which could limit year-over-year demand growth. Alongside MICE, the return of China remains another key headwind for 2023 demand prospects. Outside of China, airlift is improving, and international inbound is going back.
The big recovery story for Singapore was in ADR, which in 2022 sat just 1.3% behind 2019 levels, with rapid growth starting in the second quarter as the market fully reopened. A successful MICE boost and a strong influx of international travelers could finally replace the limited domestic business that is not enough to support hotels. This rapid growth has already softened and is expected to moderate further, as occupancy has not increased fast enough to support long-term, high growth trends. In addition, new supply should temper rates somewhat as the country is slated to open 10 hotels with 3,272 rooms this year. STR’s latest forecast for the region (November 2022) suggests that supply will increase by 2.3% in 2023.
While Malaysia has seen both domestic and inbound business progress, it is important to remember that overall figures for the sub-region are mixed and held back by Laos, Myanmar and Cambodia, where international travel has not been picked up to the same degree as elsewhere. While Vietnam was able to capture some growth in demand, especially in resorts towards the end of 2022 and beyond the Lunar New Year, there is still a wider gap as occupancy at the national level came in at a subdued 35.7%, through the first pulled down. half of the year.
Country focus: Thailand
Thailand sits at the bottom end of the pack for RevPAR recovery due to weaker occupancy, which was 21.9 percentage points below pre-pandemic comparables. Following a full reopening and end of travel-related COVID restrictions on October 1, 2022, Thailand hotel performance has begun to recover. As the country ramped up for the high season, performance in December was significantly ahead of the previous year and just 3.7 percentage points behind 2019 levels. This was partly driven by the lack of inbound travelers from China – Thailand’s top source market.
Cha Am & Hua Hin Area, a popular travel destination for Bangkok residents, saw the strongest occupancy recovery for the year, reaching 80% of 2019 levels. Leisure destinations such as Koh Phangan and Phuket closed the year in the strongest occupancy position. While cities such as Chiang Mai and Bangkok lag behind in 2019 for December, both markets have seen continuous improvement throughout the year, especially as the peak season continues.
Looking at room rates, it was a more positive story for Thailand. The ADR for the year came to 3,568 THB, up 1.3% over 2019 and 42.5% year over year. The country recovered in the second half of the year, achieving a 20% premium for the fourth quarter compared to Q4 2019. Pattaya area and Phuket saw the strongest performance for 2022 compared to 2019, while Chiang Mai and Bangkok just missed the recovery. For Bangkok, a potential challenge is that rate growth has reached new historic highs, adding to a strong pipeline, cost increases and profit margins under pressure.
As we look ahead, the reopening of key source markets, such as China and Japan, will present an upside for Thailand, and eased restrictions will likely also attract long-term European and North American demand. We also expect the continued increase of India as a source market, a trend visible pre-Covid with new air routes introduced. This could, in addition to broadening the inbound risk profile, also offer the opportunity to disrupt the traditionally strong seasonality seen in Thai resorts.
This article originally appeared on STR.
