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Dramatic changes happening in new hotel development across Southeast Asia

12 Nov 2020

Due to the severe slowdown of COVID-19 with global and regional chains, dramatic changes are happening in new hotel development projects across Southeast Asia, rapidly shifting their attention to conversion opportunities and a management-light approach. According to STR data, the stakes are high from a market size assessment, with over 80% of their reporting 8,757 foreign s. Besides that, the recent Soft Brand Hotels research article by hospitality consulting group C9 Hotelworks notes that Vietnam, Indonesia, and the Philippines are the top three countries in the region with the highest number of independent hotels. 

The explosive growth trajectory of Southeast Asia in hospitality over the past decade has been driven by developers new to the industry or those expecting growth in hyper-tourism. In the wake of the pandemic, this love affair with hotels has quickly soured and suddenly owners are looking at stopgap measures for their multimillion-dollar assets as operating losses mount by the day.

"It's bad out there and about to get uglier," says Bill Barnett, Managing Director of C9 Hotelworks.

Rising population from lenders and a rising storm of unpredictability has set hotel owners in a sea of economic uncertainty as to the fade away. 

In the midscale and upscale tiers, this is particularly prevalent, as most markets are domestic reliant, and seeing cheap deals at the top end of the market creates a domino effect across tiers. The bottom line, there is simply not enough broad demand to sustain the hospitality sector in Southeast Asia and the squeeze is felt directly in the middle of where the largest supply of rooms is located. 

The emergence of greater emphasis on soft brand offerings by global brands such as ACCOR, Marriott, and Hilton is another key hotel trend across the area highlighted in C9 Hotelworks'research. An increasing number of owners who want their name reflected on properties and non-standardized design approaches are bringing this light approach into account. Add the fast-track to operating properties conversions or franchise options for experienced developers and there is clear evidence of major industry shifts.

"Bill Barnett, speaking to this C9, adds," The hotel industry in Southeast Asia is being driven into a new cycle by the necessity generated by the pandemic and common practices that are now accelerating in the region in North America and Europe. Our study demonstrates the rapid growth of franchising, third-party managers, and a pivot to management-light approaches through international chains. Given the large size of independent hotels, it is a logical step to fish where the fish are found. 

David Johnson, CEO of Delivering Asia Communications, summarises the post-COVID outlook, says "distribution and brand are at the center of a new disruptive cycle." Although it is a complete deviation in recent times from the standardized mass-market approach, it is without a doubt the shape of things to come.

 

Source: Destination Thailand News