The rapid, explosive surge of Omicron cases around the world is weighing heavy on Asia-Pacific countries that were only just beginning to reopen their international borders. The latest variant once again puts those border reopening on ice — not ideal when the Winter Olympics is only weeks away.
Daily Lodging Report
Skift’s Daily Lodging Report is a subscription-required, email-only newsletter read by anyone and everyone in the hotel investor, owner, and operator space, including CEOs of some of the industry’s top brands. It covers North America and Asia Pacific with two separate regional editions.
Here’s a sampling of what the Daily Lodging Report provided to its readers this past week. If you’re not a subscriber, you should be. Don’t wait. Sign up now here.
Sunday, Jan. 2
Lotte Hotels & Resorts is seeking to add a four-star hotel in downtown Chicago, IL, said to be the Kimpton Hotel Monaco Chicago, to enlarge its U.S. hotel network and international profile to its IPO scheme. By adding the 190-room Kimpton, Lotte would be managing four hotels in the U.S., including the one in Guam.
Skift Note: True to its word, South Korea-based Lotte Group is beefing up its U.S. hotel presence.
Monday, Jan. 3
Fitch Ratings said the emergence of Omicron will upend reopening plans for many tourist economies in South Asia and ASEAN. At this point we feel the worst thing a country or region can do is try to beat the surge. Many countries are also tightening restrictions for inbound travelers. Thailand really tried to do the right thing with reopening, but they really are not that much better off than the countries that waited to reopen or still haven’t. Thailand had more than 900 Omicron cases as of January 1. Thai authorities were expected to decide on any potential change in restrictions today. The Thai Hotels Association said that the temporary suspension of the quarantine-free scheme has already created a gap where travelers are unable to plan flights or hotel bookings for the next few months. They are already warning of a disaster for hoteliers in 1Q22 with the need for the government to step up and cover their costs. Metro Manila raised its Covid-19 alert status to level 3 from January 3 to January 15. They only have 10 reported Omicron cases but expects a lot more. Across the entire Philippines they are reporting two-month high daily cases. There will be casino closures with the level change in Manila as well as reduced operating capacity rules for social events, tourist attractions, dine-in restaurants, amusement parks, gyms, and personal care services. The Hong Kong government is wrestling with Omicron cases, local transmissions that they believe were caused by some pilots and others breaking the quarantine rules. The HK government expects to further expand their vaccine bubble before the Lunar New Year. We think it is pretty safe to say that with the Lunar New Year taking place so close to the Beijing Winter Olympics, hoteliers in China should not get their hopes up. Macau health authorities announced lengthened quarantine-on-arrival requirements for visitors coming from high-risk pandemic countries including the Philippines, India, and the United States. The quarantine requirement for foreign entrants has also been pushed from 21 days to 28 days. 2022 will be the third year that we once again remind you of our view that the Virus will be what dictates visitation and travel policy, not any government officials or hotel executives.
Skift Note: The explosive surge of Omicron cases around the world is going to hit the already-fragile reopening of Asia Pacific to international travelers.
Truist said the news that the Consumer Electronics Show in Las Vegas will be cut short by one day not long after many large exhibitors pulled out is an example of the fragile situation for meeting planners, exhibitors, and event organizers. The JP Morgan Healthcare conference in San Francisco was supposed to be the return to normalcy but then they decided to go virtual. While the CES show and Las Vegas is not important for hotel REITs or most hotel C-Corps, Truist said the read through is such scale-backs and cancellations does not bode well for other group/convention events for the rest of 1Q22 and possibly into 2Q22. Truist said meeting planners and private hoteliers are expressing increased concern about the recovery of business groups, not just for 1Q22 but 2Q22 and possibly later in the year. Remember that ALIS is later this month, and Truist said that conference is where new hotel brands and other big announcements are typically made. A virtual announcement will have less impact than a live announcement. Then again, a virtual announcement with many people watching will still be better than an announcement in a room for 300 people when only 50 are there and half are with the show. Assuming all goes like we have seen in South Africa and the UK, the peak in the current wave should be in a couple of weeks. While not too early to say that the group recovery may be pushed out a couple of months, we think it is too early to write off 2022 in total.
Skift Note: That bullish take on revived conventions that came from hotel CEOs like Hyatt’s Mark Hoplamazian last year? Don’t count on it.
Tuesday, Jan. 4
The outbreak of Omicron variant cases in Hong Kong is likely to delay the border reopening with Mainland China and Macau, which should not be that big of a surprise. The delay is expected to run until the beginning of 2Q22, meaning hotel and casino operators will miss out on any boost from the Chinese New Year holiday. This has not been confirmed but was a prediction made by scholar Davis Fong but is pretty much common sense at this point. Fong believes the quarantine-free travel scheme will not be possible until at least 21 days free of Covid in Hong Kong. Hong Kong’s health department reported 29 new Covid cases on Monday, the highest level since April last year. All of this is being blamed on a breach of quarantine protocol by a Cathay Pacific crew member, but China, Hong Kong and Macau officials need to realize they can’t stop the virus from getting entrenched in their society.
Skift Note: Hong Kong just can’t catch a break.
Wednesday, Jan. 5
Fitch Ratings said international tourism across the Asia Pacific region is expected to recover more slowly than previously thought, impacted by low consumer confidence and the expected continuation of China’s “zero-Covid” policy through most of 2022. Fitch said China’s reluctance to reopen its borders would continue to impact the region this year, particularly in markets that rely heavily on international tourism, resulting in another subdued year of APAC travel ahead. This is despite higher vaccination coverage and stepped-up reopening efforts. While Fitch mentioned low vaccination areas like the Philippines and Indonesia as being vulnerable, they also mentioned Japan and Singapore, as tightening their borders again. While China is an issue, it is one that everyone should have expected, at least through the Beijing Winter Olympics. The bigger concern is the impact of Omicron and the reaction by so many countries to a variant that spreads like wildfire, even in vaccinated people.
Meanwhile in China, the government continues their uphill battle, this time sealing up with Winter Olympics “bubble” preparing the Games venues, transport, and staff. Thousands of Games-related staff, volunteers, cleaners, cooks, and coach drivers are locked in the bubble for weeks, with no direct physical access to the outside world. While that is all well and good, the global media and 3,000 athletes will be arriving in the next few weeks which kind of makes the whole logic behind holding the staff prisoners this early a bit ridiculous, especially considering they expect to have fans at the events. Anyone entering the bubble must be fully vaccinated or face a 21-day quarantine, and everyone inside will be tested daily and must wear face masks at all times. If you leave the bubble, you must quarantine to return home which confuses us even more. This is set to be operating well into late March and possibly early April. Foreign diplomats in China are already raising concerns about all this.
Skift Note: China’s zero-Covid policy at containing the virus’s spread puts a major dent in its plans in hosting a global sports event once aimed at showing off the country — and former Summer Olympics host city — to the world.
Thursday, Jan. 6
Credit Suisse named Hilton Grand Vacations as one of their highest conviction ideas. CS described HGV as the most under-followed name in their coverage. They believe there will be upside to the core business from an unprecedented high quality inventory pipeline, EBITDA uplift from a shift from FFS inventory to owned, revenue synergies from significant upgrade potential from legacy DRI owners and HGV can now leverage the lower price DRI portfolio to capture a broader portion of 112 million Hilton Honors Members who were likely not being appropriately targeted previously.
Skift Note: Investors and analysts are signaling they’re on board with major hospitality groups’ belief that branded is better when it comes to travel sectors like timeshares and all-inclusive resorts.