Is China Sending the Hotel Industry a Grim Recovery Signal?

China’s hotel industry got one piece of good news this week, but its recent setback is a global warning for hoteliers amid a case surge heavily impacting the unvaccinated.

Hotels in China averaged a 68 percent occupancy rate last week, according to STR — slightly higher than the 67.2 percent seen in the U.S. and the first time China exceeded American hotel occupancy in six weeks.

But while this is a good boost in the Chinese hotel industry’s recovery, hoteliers should focus on how the Delta variant dealt the country a notable setback in recent weeks — and how that impact might sting even more in other parts of the world.

“It could be a scary situation if everyone starts getting impacted by these variants,” said LW Hospitality Advisors CEO Dan Lesser. “If you do have government shutdowns again, whether it’s state or federal, it’s going to be horrific.”

China’s hotel recovery setback since late May is largely attributed to an outbreak of cases of the Delta variant in Guangdong province, which includes the city of Guangzhou.

Hotel analysts and the executives of companies like Marriott noted in recent months an outbreak in China typically took two weeks to get under control and regain hotel recovery momentum. But this more recent outbreak took longer to curb due to its higher rate of transmissibility.

Case counts have been on the decline since mid-June, and hotels in Guangdong province are expected to see a boost in July due to a lifted travel advisory, Ling Wei Tan — vice president of JLL Hotels & Hospitality’s Greater China division — told Skift via email.

But if reports of some hotels in Guangzhou seeing 40 to 50 percent occupancy are true, that’s still well below the 68 percent national average.

The world has closely monitored China’s pandemic comeback with a “first in, first out” narrative, given the initial outbreak of coronavirus in the city of Wuhan as well as the country’s rapid containment. Stringent lockdown measures and a population that generally followed the orders from the country’s strong, centralized government gave China a leg-up in recovery. Marriott even expected to be back to normal performance levels in China at some point this year.

But any hiccups in the country’s hotel rebound could reverberate in other parts of the world, particularly the parts that don’t go to such heightened containment measures as China.

A Surging Strain

The more contagious Delta variant of coronavirus is now the leading strain of the virus around the world. The 32,600 new cases reported in the UK Monday was nearly 70 percent higher than what the country saw at the end of last month. Florida has reported thousands of new cases each day this week, and the state’s 14-day average of new cases is up by 219 percent.

Most hot spots in the U.S. and around the world are largely centered on areas with low vaccination rates. Outbreaks have been reported in Arkansas, Florida, Missouri, and Nevada.

The Australian cities of Sydney and Melbourne are both in lockdown as a result of rising case counts tied to the Delta variant. South Korea reinstated various social distancing measures and gathering restrictions while the smaller city of Ruili in southwest China went into lockdown last week.

“If we go through a repeat performance of what we went through last year, that’s going to be a double whammy that’s really horrific for the sector,” Lesser said.

Marriott, Hilton, Accor, and IHG all declined to comment to Skift for this story as a result of the quiet period in the lead-up to upcoming second quarter earnings calls.

Vaccinate, Vaccinate, Vaccinate

The idea of more lockdowns and a reversal of travel’s reopening isn’t getting much traction with governments that have already lifted those restrictions.

Despite a surge of new cases in his state, Florida Gov. Ron DeSantis this week described the variant and others as something “designed to frighten people,” CBS Miami reported.

While other leaders weren’t as combative regarding the nature of the latest strain, they doubled down on reopening plans and emphasized the importance of vaccines in mitigating any further outbreaks.

The latest outbreak sped up the vaccination rate in Guangdong province. Before the outbreak was reported in May, only 39 million doses were administered in the province, but, by June 20th, the figure was 101 million, Wei Tan said.

The UK still plans to drop most of its pandemic restrictions next week in light of its high rate of vaccination. Leaders in Cape Cod showed no signs of backing off reopening to summer travelers, despite a wave of new cases reported over the July 4th holiday week. Instead, they noted the region has one of the highest vaccination rates in the U.S.

Back in China, hotel leaders similarly see higher vaccination rates as the vital way to move forward from the pandemic and new strains of the virus.

“As the vaccination process is taking place smoothly in China, we are confident that China’s economy will further recover from the pandemic and drive the growth of business travel,” Qi Ji, Huazhu’s founder and CEO, said on an investor call at the beginning of the outbreak around Guangzhou.