A huge pipeline of new hotel development projects and the severe impacts of a pandemic-triggered slowdown made for disruptive mix, driving hospitality chains in Southeast Asia to turn their attention to conversion and a management-light approach during Covid-19.
The stakes are high from a market size assessment, according to STR data which showed that over 80% of their reporting 8,757 international standard hotels in Southeast Asia are classified as independent.
Vietnam, Indonesia and the Philippines are the top three countries in the region with highest number of independent hotels, noted hospitality consulting group C9 Hotelworks in its recent Soft Brand Hotels Review research.
Southeast Asia’s explosive hospitality growth trajectory over the past decade has been driven by developers new to the industry or those expecting hyper-tourism growth. However, this love affair with hotels has quickly soured in the wake of the pandemic and suddenly owners are looking for stopgap measures for their multimillion-dollar assets as operating losses mount by the day.
“It’s ugly out there and about to get uglier,” says C9 Hotelworks managing Director Bill Barnett. “Rising pressure from lenders, and a mounting storm of unpredictability has set hotel owners adrift in a sea of economic uncertainty.
“This is especially prevalent in the midscale and upscale tiers, as most markets are domestic reliant, and seeing cheap deals at the top end of the market creates a domino effect across tiers. Bottom line, there simply is not enough broad demand to sustain Southeast Asia’s hotel sector and the squeeze is felt directly where the largest room supply sits—in the middle.”
The emergence of greater emphasis on soft brand offerings by global brands such as Accor, Marriott, and Hilton is another key hotel trend that C9 Hotelworks' research found.
This light approach is driven by a growing number of owners who want their name reflected on properties and non-standardised design approaches, while there is a growing shift towards fast-track conversions for operating properties or options to franchise for experienced developers.
Speaking to this C9’s Bill Barnett adds, “Southeast Asia’s hotel industry is being driven into a new cycle by the necessity generated by the pandemic, and common practices in North America and Europe that are now accelerating into the region. Our research shows fast development in franchising, third party operators, and a pivot by international chains to management-light approaches. Given the significant size of independent hotels, it’s a logical step to fish where the fish are.”
Looking ahead, David Johnson CEO of Delivering Asia Communications foresees that the "total departure from the standardised mass-market approach in recent times" is a sign of things to come in post-pandemic future. “Distribution and brand are on the cusp of a new disruptive cycle," he added.