Though generally not as far along in its recovery as other nations, hotel performance in Greater China is giving hotel executives reason to believe conditions are improving.

During their companies' respective third-quarter earnings calls, executives at publicly traded hotel companies spoke about how the Chinese government’s zero-tolerance policy to COVID-19 and lockdowns of different cities have affected domestic hotel demand as well as new construction.

“[Revenue per available room] is still lagging behind 2019 levels in Greater China and in our Asia-Pacific, excluding China, or APAC region. Greater China improved the most in the quarter, with RevPAR 23% below 2019, 30 percentage points better than a quarter ago. However, the recovery there remains uneven given China’s renewed commitment to its strict zero‐COVID policy. The good news is that we continue to see that when a market re‐opens for domestic travel after a lockdown, lodging demand rebounds very quickly.”

“In the Asia-Pacific region, third-quarter RevPAR was up 46% year over year and down 16% versus 2019. RevPAR in China was down 14% compared to 2019, improving 33 percentage points quarter over quarter, as leisure demand picked up over the school holidays and COVID lockdowns in Shanghai and Beijing were lifted in July. Travel demand remains volatile in China as a result of strict COVID policies and restrictions to contain new outbreaks. The rest of the Asia-Pacific region saw continued improvement with RevPAR, excluding China up 10 points quarter over quarter with September RevPAR down just 8% to 2019. We remain optimistic about further recovery across the entire Asia-Pacific region as travel restrictions continued to ease and borders reopened to international travel. For example, our recent booking pace in Japan has already started to increase following the recent government stimulus announcement and border openings.”

“We are experiencing the expected lull in openings for select-service hotels in the United States, and also the China openings have really taken a hit, primarily because of the inability to get contractors and workers on to job sites and to get materials to job sites. So, the serial lockdowns have really cost us significantly, but we're also seeing now on the other side of that some really significant improvements. And so, we've opened a couple of really important hotels in China at the beginning of October.”

“We are incredibly proud of our Asia Pacific and our China teams, given everything that they've accomplished and how well they're performing. It is not in any way, shape or form an issue for us going forward. I mean, the delivery consistently from these teams over the past few years, we're very optimistic about the long-term prospects there. We've got 60,000 direct franchising rooms in the pipeline. Year to date, the team has opened about the same number of rooms as they opened back in 2019. And more impressively, the development team in China has awarded the same number of contracts year to date through the end of the third quarter as they did back in 2019. As their conversion pipeline has doubled, as they've been successful introducing new brands to new markets across [the region], mainly in China, and as they've been delivering consistently, quarter-in quarter-out, an 8% net room growth in our direct franchising business despite all the challenges last quarter, we're feeling very good about long-term the prospects over there.”

“Short term, we probably will still — it's a gradual ramp-up process and maybe with fluctuation between due to the dynamic zero-COVID policy in place. So, I think that just to give you an example, in Macau, recently, there have been in some cases, so we have seen the measures to border crossing has been tightened. And there are cases — there were one case, a single case in MGM Cotai, and we had to shut down the operation for three days, and we just reopened and quarantine yesterday and will reopen today.

“These types of things could happen from time to time if the policy is still in place. But overall, I think over the long run, it's a positive.”

“The crown jewel of our China business was always, and we thought always was going to be the China outbound business. And the reason why is the take rate was higher for the outbound business than it was for the domestic business. The inventory is more unique.

“There's less competition, and the average daily rate is a lot higher, so the outbound business was always the price part of our business, and that's what we're focused on. Now as you know, not a lot of people are leaving the country right now, but we want to be prepared for when they do. And they eventually will, of course.

“And so the two things we're doing to prepare is, No. 1, we're going to be continuing to invest in our brand in China. And No. 2, if people are traveling and they're leaving China, they're going to other countries, and we would call these the corridor countries. And the primary place they're first probably going to go is intra-region. They're presumably going to be going to Southeast Asia, Korea, Japan, eventually, they'll go a little further to Europe and then they'll presumably come back to the United States, especially maybe some of the coastal cities.

“What we need to do is make sure we have enough supply in these corridors and continue to invest in our brand in China. And I think by only having an outbound business, we can actually focus all of our investments just on that, and it actually makes a lot more cost effective, a lot more efficient. And one thing I've learned is the more focused we are, the more likely we are to achieve our results.”

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