Looking back at the SARS outbreak and hotel performance recovery
As indicated during a previous communication regarding the outbreak of coronavirus (COVID-19), drastic changes over the past two decades render a direct comparison with the 2002-03 SARS outbreak rather complex. However, we felt it important to analyze hotel performance and recovery in China during the early part of the millennium in order to derive possible projections for the current outbreak situation.
For the purpose of our analysis, we looked at Beijing, Guangdong, Hong Kong, Mainland China, Shanghai, Singapore and Chengdu/Chongqing. But first, let’s lay out the differences.
2002 was a very different time for data analysis and the use of revenue management in China, and STR’s data sample was significantly smaller in the country. For perspective, our China performance sample covered 160 properties in 2002 compared with 6,113 in early 2020. While that 2002 sample was small, it was, however, indicative of the trends at the time. As we live in a different world today, there are limitations of how much of what happened during SARS can be used to project the hotel performance impact of the coronavirus.
Differences in the virus
SARS – Available information suggests that persons with SARS are most likely to be contagious only when they have symptoms, such as fever or cough.
Coronavirus – With COVID-19, however, there have been reports of spread from an infected person with no symptoms via close contact.
China (2002 vs. 2020)
- Smartphone technology and the presence of social media
- Convenience of travel and connectivity, through high-speed railways and low-cost airlines
- Significant development in hotels
- Travel has increased substantially across the globe, not only for Chinese outbound markets.
- Different economic situations
Mainland China performance
The charts below show the hotel performance impact of the SARS outbreak. The first case of SARS was reported in Guangdong in November 2002. In March 2003, the World Health Organization (WHO) issued a global alert for China, Singapore and Vietnam, and some additional cases were reported outside of these locations. It wasn’t until July 2003 that the WHO announced the SARS outbreak had been contained, marking nine months from the first report to containment. For Mainland China, the lowest occupancy month during that period was May 2003 at 18%. At the same time, ADR was at CNY551, which was a decline of 8% year over year. Then by August, after containment, occupancy was back up to 67%. From an ADR perspective, Mainland China reported just three months of declines in April, May and June of 2003.
For context ahead of this time period, February 2003 (the month of Chinese New Year) produced occupancy of 61%. Remember, the global alert came from the WHO in March.
Performance recovery in key markets
Beijing was one of the severely infected areas and the last Mainland China city removed from list of areas with local transmission (June 24, 2003). Occupancy fell to as low as 10% in May then recovered back to 52% in July, 65% in August and 70% in September.
Performance in Guangdong, where the SARS outbreak originated, fell in April 2003 and continued until WHO removed its travel alert at the end of May. The organization then removed Guangdong from the list of areas with local transmission on 13 June, and the market quickly bounced back and showed occupancy of 71% in July.
Hong Kong was removed from the list 10 days later, and occupancy shot up to the 60% level in July then 75% in August.
Shanghai, Chengdu and Chongqing were not under the spotlight during SARS outbreak, but were also significantly affected. After hitting a low occupancy point in May, occupancy for each was back to the 60% level in July.
All areas, which likely differed in terms of number of reported cases, all suffered a negative impact and performed at a similar level throughout the outbreak. Some recovered slightly quicker than others, but all bounced back swiftly after containment.
Data from 2003 displayed China’s ability to recovery quickly following containment of SARS. Assuming a “most likely” scenario from our forecast partner, Tourism Economics, the virus will be contained by the end of the month and performance recovery will begin. That would likely set up a quick hotel performance recovery period when compared with the time of SARS.
STR will continue to monitor and report on performance with adjustments to this analysis as appropriate.