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How did crises of the last two decades impact APAC hotel profitability?

This research article analyzes previous crises across key countries in the Asia Pacific region to understand the impact on hotel profitability. While COVID-19 has presented unprecedented challenges for the global hotel industry, looking back at past situations shows the industry’s ability to recover.

STR’s research revolved around seven major countries in the region: Australia, China, Indonesia, Japan, Malaysia, Singapore and Thailand. These countries provide the strongest and most consistent P&L sample from 2002 through 2019.

*All financial figures represent US$ constant currency.

Different crisis, different impact

  • The SARS outbreak lasted roughly six months and spread to more than two dozen countries before being stopped in July 2003. Data from Oxford Economics does not show any major impact on GDP growth due to the shorter time of the outbreak and less reliance on international demand compared with today. However, Australia was the only country that maintained hotel revenue and profit growth. Annual P&L data (excluding Australia) shows that the region’s occupancy fell 10.9%, while average daily rate was down just 1%. Gross operating profit per available room (GOPPAR) declined 1.5 times more than total revenue per available room (TRevPAR).
  • The Indian Ocean Earthquake and tsunami of 2004 severely affected 14 countries as one of the deadliest natural disaster in history. Regardless, there seemed to be no impact over annual economic data from Oxford Economics, and hotel data showed only a slight occupancy decline, driven mostly by Phuket and the Thailand South markets (leisure destinations) during the impacted month. There was no visible impact on annual performance.
  • The Japan Tsunami of 2011 was one of the worst natural disasters in the country’s history and stifled GDP, which declined 0.1% from the previous year. However, hotel data does not show a major impact with only a 2% drop in GOPPAR, mostly a result of 4% decrease in occupancy.
  • The 2014 Hong Kong protests lasted more than two months and led to a double-digit decline in hotel ADR (-11.3%) even as occupancy remained steady during that time. There also was no impact on GDP growth. A lagged effect on demand was visible in 2015 when we saw the number of rooms sold in the market fall 1.6%. Hotel profitability data showed a similar trend with no impact in 2014 but a 9.3% drop in GOPPAR in 2015. Recovery did not occur in full until 2017.
  • The Global Financial Crisis of 2008-09 started in the U.S. but spread around the world. This is the only crisis where we see an impact across all seven countries in our analysis, as clearly demonstrated by the graph below.
Different crisis, different impact

A deep dive into the GFC

In 2009, GDP declined in Japan (-5%), Malaysia (-2%) and Thailand (-1%) but kept growing, albeit at a slower pace, for all other countries included in the analysis. This was quite different from the declines we observed in other regions like Europe and the Americas, which is indicative of the different stages of growth in those other parts of the world. Most European countries were established economies, for example, while some of the APAC countries were still emerging. Japan showed the worst impact in the APAC region mostly due to the hit on exports during the slowdown. On the contrary, Australia’s strong economic performance during the GFC was linked to both government stimulus measures and dependency on Chinese demand, rather than U.S.

Hotel profit levels were strongly affected, and APAC GOPPAR dropped 1.6 times more than TRevPAR. The strongest decline was observed in China with a 40.5% drop. Ratio-to-sales tells an interesting story as profit conversion dropped 7 basis points between 2008 and 2009 and did not return to above average until 2016. This trend was consistent across all APAC countries. Overall performance data was skewed downward by China, which experienced a significant drop in profit levels. Singapore, on the other hand, remained resilient with a flat conversion across the years.

A deep dive into the GFC

Demand and revenue levels increased from 2009 onwards. An increase in occupancy came with an increase in property staff working hours, which was linked to more variable expenses. Those factors contributed to a drop in profit margins. Departmental expenses and undistributed expenses increased at a similar pace as revenues. However, labor costs rose significantly beginning in 2011—from a ratio-to-sales of 20.6% in 2010 to 30% in 2019.


The countries included in our analysis showed resilience when faced with the above-mentioned crises, and most of those crises did not have a major impact over annual economic data. The only situation that showed a lasting impact on hotel data was the Global Financial Crisis.

The COVID-19 pandemic is much more significant by every measure, and the impact on hotel profitability has been extreme. Among the markets STR forecasts in the region, the following will show declines in revenue per available room (RevPAR) multiple times those recorded during the GFC: Jakarta (11x), Sydney and Melbourne (8x), Bangkok and Tokyo (3x), Singapore (2x).

And despite the Chinese markets performing better than any other region late in 2020 (thanks to strong domestic substitution), we still expect the final impact from COVID-19 on those markets to be worse than the GFC. For example, Beijing is projected to see a RevPAR decline 1.3 worse than during the GFC, while Guangzhou’s decrease will be 21 times worse.

This will impact profitability data for the region and will challenge the breakeven point of properties in the area, most likely driving permanent closures—especially across Independent properties without access to the capital needed to survive the crisis.

Our monthly profitability data from the U.S. shows us that GOPPAR levels were significantly lower because of the pandemic. In May for instance, GOPPAR was down 117.7% year over year. Even with improvements, GOPPAR was still down 88.3% in October.

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