After a year of travel restrictions, hotels in Asia-Pacific countries are poised to recover quickly once vaccinations become more widespread and international travel returns.

During the Hotel Data Conference: Global Edition, hotel and travel experts explained how hoteliers in this region hit first by the COVID-19 pandemic have survived thanks to domestic demand and are ready for the full return of travel.

The outlook for aggregate travel for the Asia-Pacific region, which includes international and domestic tourism, shows the region is projected to recover faster than the world as a whole, said Michael Shoory, senior economist at Tourism Economics.

“The outperformance of APAC accelerates as time goes on,” he said, adding that the gap continues to increase through 2025.

There are three drivers behind this pace of recovery, he said. The first is the pandemic timeline, and the expectation is the widespread rollout of COVID-19 vaccines in most APAC countries should come in the second half of this year after a slow start. The second driver is policy response, and inbound traveler restrictions are expected to remain in place until mid-2021 through most of the region before slowly easing. The last set is the economic factors underpinning travel demand, and global gross-domestic-product growth this year is expected to be at its fastest pace in 40 years.

“In the near term, the realization of this demand will be limited by vaccine rollout and travel restrictions,” he said. “However, in later years, economic factors such as GDP will play a larger role.”

The initial slow rate of vaccination means international travel restrictions will remain in place longer in the region than other places, Shoory said. In terms of travel restrictions, the Asia-Pacific region has experienced more negative effects of international restrictions than the global average because the restrictions have been stricter.

“APAC’s strict approach so far has led to relatively large negative impacts on inbound travel,” he said. “However, the strict approach has also helped to contain the virus, and as a result, domestic tourism has been less negatively impacted.”

The region’s domestic outlook is stronger in the near term compared to the rest of the world because of the effect of border restrictions on the spread of the virus, he said. Domestic travel has restarted sooner, and its outlook accelerates in later years.

Looking at Australia from 2020 onward, there’s a reasonably straight and nice growth trajectory, said Jesper Palmqvist, area director, Asia-Pacific, at STR, CoStar's hospitality analytics firm. Revenue per available room is about 100 Australian dollars ($76.24), which is down from its 2019 average of AU$140 ($106.74). The regional markets are doing well while the larger markets can’t do compression yielding. It’s now a matter of waiting for more confidence and a path without restrictions.

New Zealand has managed the pandemic well, and while there is a limit to what its domestic travel market can do, occupancies have climbed, he said. Quarantine business has mainly dominated in the gap in the larger cities.

Both Australia and New Zealand are seeing fourth-quarter bookings increase during the summer holidays.

“That’s the point I will hammer home all day, all week and all month about the pent-up demand — that it’s there and people want to travel,” he said.

In countries that rely so much on inbound travel, such as Fiji and other island markets, there’s no recovery theme around RevPAR and average-daily-rate levels are dropping down to $150 instead of the usual $350, Palmqvist said. Many of these islands are dependent upon cruise business as well, and that’s a particular segment that will take time to come back.

Japan is seeing its second large recovery curve after a spike in cases and the launch of a state of emergency, he said. Everyone is waiting now to hear about the final word regarding the Olympic Games in Tokyo. Japan is one of those markets that has an opportunity to recapture demand reasonably quickly even though it’s been challenging for the last several months.

In China, after falling from highs of about 330 Chinese yuan ($50.40) and 65% occupancy in 2020, RevPAR and occupancy are on the path to recovery again and have reached 300 Chinese yuan ($45.82) and 60% occupancy by late March, Palmqvist said.

“We're getting there, and we're now almost up to those really high levels that we saw last year,” he said. “We are very close to where we were earlier in a very quick recovery.”

Coming into the fourth quarter, tier-one cities in China are slightly ahead of other cities, he said. Normally, they should be further ahead, but they began pushing occupancy rates thanks to corporate demand late in the year.

What’s happening now is an opening of the gap, he said. There should be more business travel, more meetings, incentives, conferencing and exhibitions travel and more normality within the large domestic market in the country. Beijing is on the rise now.

“Things are happening in China, and it's really, really taking off,” he said.

Rates in India took a long time to recover from the Great Recession, and there are some markets where rates still haven’t recovered over the last 11 years, he said. Much of that recovery was wiped out by the effects of the pandemic, and rates fell back. Occupancy in India dropped as well, but the levels are coming back.

“The question now is, can the second quarter and the third quarter continue to grow?” he asked.

Even during the pandemic, India was starting to grow a broad base of domestic travel, and apart from rate issues, hoteliers in India can drive domestic growth and reach a higher level than previously expected, he said.

Looking at the hotel supply and demand economy in China, the high-speed rail system significantly drove the travel industry and hotel development, said Christine Liu, regional manager, North Asia, at STR. Hotel investors planned their projects along the high-speed rail system, which contributed to the growth in domestic travel, and domestic travel has contributed much during the pandemic periods. Since 2014, hotel supply has grown at a fairly stable pace of about 5% to 7% each year, and demand growth outpaced supply in most of those years.

RevPAR dropped 35.4% from 2019 to 2020 because of the coronavirus pandemic, she said. However, travel demand has generally increased since early April 2020. Corporate and leisure travel demand have been active since May 2020, and demand saw another boost in mid-July thanks to school holidays. Travel demand in 2020 was near 2019 levels in September and October.

An analysis of RevPAR indexed to 2019 levels show luxury and upper-upscale hotels outperformed the other segments when there was more leisure demand, particularly during national holidays such as the first week of October known as Golden Week, Liu said.

“The luxury and upper upscale further closed the gap to 2019 in those days, when leisure demand was very strong,” she said.