China’s Omicron Setback Not a Deterrent for Hotel Developers

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, March 13

Mandarin Oriental Hotel Group has launched a branded collection of the world’s finest private villas and mansions in sought-after locations, while providing exceptional service and experiences. Mandarin Oriental Exclusive Homes is being launched in partnership with StayOne. Specific benefits of a Mandarin Oriental Exclusive Home include: exceptional and exclusive homes, dedicated personal concierge service, private, on-demand culinary experiences, luxurious housekeeping, family-friendly experiences, thorough hygiene and safety standards, luxurious amenities, and exclusive benefits for Mandarin Oriental regular guests. The initial Collection of Mandarin Oriental Exclusive Homes comprise the following: In Ibiza, Tagomago Private Island, The Palms, San Jose, and Villa Lagarto, Jesus. In the South of France, Villa Oxygen, Grimaud, and La Maison vue de Saint Jean, Ese-Mer. In Mallorca, Villa Puesta del Sol, Port d’Andratz and Ca’n Miquelet, Deia. In the U.K., the Cirencester Estate, Cotswolds.

Skift Note: A branded home rental offering that adheres to the brand standards of an actual Mandarin Oriental hotel makes for quite a competitive advantage over other hotel companies entering the vacation rental space. 

Monday, March 14

Things are getting worse instead of better in China regarding the Covid-19 outbreak, as authorities placed Shenzhen into a week-long lockdown. The Covid outbreak there is linked to Hong Kong and although all the measures they have taken and quick spread in Hong Kong should have resulted in a peak there, Chief Executive Carrie Lam said Hong Kong’s cases have not peaked yet, reporting 32,340 new cases on Sunday. The lockdown in Shenzhen will last until March 20^th and came after 60 cases were detected in the city over the week. All 17.5 million residents will be tested. Shenzhen is located in Guangdong Province to the immediate north of Hong Kong. For all of Mainland China, they reported 3,400 new cases of Covid-19 on Sunday, double the number reported on Saturday. Aside from Shenzhen, the city of Jilin in China’s northeast and nearby Yanji were also partially locked down with Jilin reporting more than 500 cases on Sunday. After two years of a “Zero-Covid” policy, it is about time someone admits their policy was flawed.

Macau has finally reached an 80% vaccination rate. That has resulted in calls to resume group tours from China, but the director of Macao’s Government Tourism Office said that is still a long way off. The Mainland government has not set any vaccination targets for the resumption of group tours. The MGTO director was speaking at a seminar on the future of tourism in the post-pandemic region. We can only hope that this China outbreak, two years after the first one, marks the end of the pandemic just like the first one marked the beginning.

Skift Note: Lower vaccination rates among elderly populations and a fear of overwhelming healthcare networks drives China’s zero-tolerance approach to new case spikes. This isn’t good news for hotels looking to see some semblance of normality this year.

Service Properties Trust announced Todd Hargreaves has been appointed as its President and Chief Investment Officer, effective April1, 2022. Mr. Hargreaves has served as Vice President of SVC since 2019 and as Vice President and Chief Investment Officer of SVC since 2020. Mr. Hargreaves succeeds John Murray, who is becoming President and Chief Executive Officer of Sonesta International Hotels Corporation, also effective April 1, 2022. Mr. Murray succeeds Carlos Flores at Sonesta. Flores is resigning from his position effective March 31, 2022. In connection with his transition to President and CEO of Sonesta, Mr. Murray will resign from his roles as President and CEO of Service Properties Trust and President and CEO of Industrial Logistics Properties Trust. Mr. Murray will continue to serve as a Managing Trustee on the boards of SVC and ILPT. Mr Murray will also continue to serve as Executive Vice President of The RMR Group and a member of RMR’s Executive Operating Committee. Sonesta, SVC and ILPT are clients of RMR.

Skift Note: Sonesta’s incoming CEO comes from the lodging trust responsible for much of the company’s rapid growth during the pandemic — growth that came at the expense of Marriott and IHG. 

Tuesday, March 15

Skift, the parent company of this publication, published an article on IHG and their plans to increase their expansion in China. Greater China had both the largest share of IHG room openings in 2021 as well as room signings, outperforming both the Americas as well as Europe, the Middle East, Africa, and Asian countries beyond China. Greater China was one of only three regions IHG showed an increase in the number of properties with IHG adding nearly 13,000 rooms across 69 hotels there. IHG had a loss of nearly 4,000 rooms in the EMEAA region and a drop of almost 15,000 rooms across 30 hotels in the Americas. Greater China is the worst-performing region of the three major hotel markets right now. IHG is looking long term and said they would not stop investing in China. IHG has a 435-hotel development pipeline in Greater China, 34% of IHG’s nearly 271,000 room development pipeline, just behind the Americas which has 36%.

Skift Note: China’s setback with coronavirus case spikes isn’t rattling the country’s pace of hotel development, especially with major Western hotel companies like IHG.

Wednesday, March 16

Membership Collective Group Inc. announced that Chief Financial Officer Humera Afzal is leaving her position in June due to factors outside the Company. A search process is underway to appoint a successor. Ms. Afzal will continue to serve as CFO until the end of her notice period on June 14, 2022, and will help ensure an orderly transfer of her duties. 

Skift Note: The Soho House parent company’s chief financial officer plans to depart the newly public company this summer. One has to wonder how much her successor and others at the company can go on touting growth without answering the decades-old question: When is Soho House ever going to post a profit?

Thursday, March 17

Despite there being overwhelming public opposition to the plans for Integrated Casino Resorts in Japan and 90% of the companies that expressed an interest bolting from the bidding, Japan’s ruling political party is doubling down on integrated resorts and the three potential host candidates are racing against the clock to overcome challenges to submit their plans by April 28^th. In Osaka, plans by MGM/Orix are to build an IR on the artificial Yumeshima island in the city. The Osaka city assembly has received about 130 casino-related petitions that are skeptical on the project. Some demand the plan be dropped, others call for a referendum on whether the area should host the resort. In Wakayama and Nagasaki prefectures the prospective operators continue to be dogged by reports of having trouble securing lenders and investors. While everyone keeps talking about the opposition and how the public opinion is so against the IRs, nobody seems to be asking the more important question. Will casinos costing nearly US$10 billion (Osaka) and over US$3 billion (Nagasaki and Wakayama) be successful? While Japan won’t have the issues that have caused the huge losses for IRs in South Korea and Vietnam, the success of Macau has never been echoed in the Philippines. The hope is that these casinos will be more like the duopoly success in Singapore than the marginal success in the Philippines.

Skift Note: MGM Resorts better look to the Singapore gaming playbook in its Asia growth ambition, as other markets looking to mimic Macau like the Philippines have come up short.