While the overall pace has slowed, vaccines are widely available throughout the Middle East, most of Europe, and parts of Asia Pacific, with more than half of the population fully vaccinated across all but three STR forecast countries.
NB: This is an article from STR
The strength of vaccination programs has allowed most markets to reduce or eliminate COVID-19 restrictions, which has increased the pace of recovery and bolstered domestic travel. Vaccine passports, vaccinated travel lanes (VTLs), sandbox schemes, and reduced or eliminated quarantine requirements for vaccinated travelers have allowed short- and medium-haul international travel to recommence across many markets. Long-haul international travel will remain muted through 2025 for Europe and Asia Pacific, while Middle East anticipates full segment recovery by 2023 as EXPO 2020 has bolstered long-haul international inbound travel.
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After a strong summer and moderately successful “conference season,” rising COVID caseloads across Europe have prompted renewed restrictions. We have assessed the risk of additional restrictions being implemented at a market-level and have assumed that no long-term lockdowns will take place. We anticipate moderate impacts to travel in the short-term but longer-term resilience, with recovery expected to pace back on track in early 2022. The U.K. remains unlikely to introduce new restrictions and is benefitting from a stronger booster program compared with other European countries. Furthermore, reopened borders with the U.S. as well as lockdowns in mainland Europe could strengthen U.S. inbound travel and domestic demand.
While some countries, such as Indonesia and Thailand, continue to lag in vaccination distribution, rates have picked up significantly across Asia Pacific over the past quarter, and most countries have shifted to COVID containment policies like those found in Europe and North America. The shift in pandemic mitigation strategy coupled with plans to reopen to intra-regional and international travel will help drive recovery in 2022. China remains committed to a zero-COVID policy, and in doing so, has increased restrictions and lengthened lockdown periods across many markets. With the 2022 Winter Olympics approaching, Beijing is set to remain under strict restrictions through February 2022, and inbound international travel is not expected to resume until the second half of 2022.
Leisure remains the primary source of demand across most markets, although business demand improved across Europe and the Middle East over the traditionally corporate-centered autumn months.
The long-term recovery outlook remains largely unchanged, with domestic demand expected to bounce back in 2022. International demand is expected to reach pre-pandemic levels by 2023 in the Middle East, 2024 in Europe, and 2025 in Asia Pacific.
While we have taken into consideration increased restrictions in Europe, these forecasts do not take into consideration the release of the Omicron variant, as it had not been widely announced at the time of update. It is too early to comment on the impact, but we would estimate that, as our forecasts assume, no long-term restrictions will be put in place and therefore most of impact will be seen in short-term performance. More will be known about the impact of this new variant in the coming weeks, and the forecast update in February will be reflective of that new information.
For most of Europe, renewed restrictions have prompted short-term downgrades in demand. A strong summer mitigated some of the impact, with just nine of 32 markets projected for 2021 demand levels below expectations set this past August. While the impacts are expected to be short-lived, 2022 demand was downgraded for 13 markets because of the winter case rise. ADR has been upgraded across 19 markets in 2022, supported by stronger historical performance and rising costs.
Strong domestic and leisure demand, alongside the return of some corporate travel, allowed for upgrades in all U.K. markets except the airport-adjacent Heathrow and Gatwick. While demand has been strong, ADR has largely driven U.K. recovery over the past several months, as labor shortages, supply chain bottlenecks, and rising inflation have prompted rates to grow. As a result, ADR has been upgraded in all U.K. markets through 2023. While these factors have outweighed any impact of the October 2021 VAT increase, some minor slowdown in recovery could occur in April, with impact primarily concentrated in regional markets.
After a year-long delay, EXPO 2020 kicked off a six-month run at the start of October, and the event’s success has led to significant improvement to Dubai’s outlook, with strong ADR pushing RevPAR recovery from 2024 to 2022. Reduced restrictions and knock-on impacts from EXPO have led to modest upgrades in Abu Dhabi as well.
China’s zero-COVID policy has led to substantial demand downgrades across all markets in 2021, particularly Olympic host, Beijing. While the country has historically bounced back rapidly, strict restrictions and tight border controls are expected to remain in place through the first half of the year, which means demand downgrades across six markets in 2022.
For the rest of Asia Pacific, forecast updates are mixed, with the return of all-important MICE demand strengthening Mumbai recovery, and continued government assistance helping drive Singapore demand. While a rapid rise in vaccination rates allowed an end to lockdowns in New Zealand, Australia, and Japan, the slow reduction of restrictions and lack of business and international travel have prompted minor downgrades in short-term demand. Once again speaking to the uncertainty around Omicron, Japan announced the tightest restrictions thus far with its borders closing to all foreign travelers.
Forecast uses Total Room Inventory (TRI), which assumes no temporary closures related to COVID-19 and accounts for all available hotel rooms in the marketplace regardless of operational status. For historical data, all rooms that we know to be closed have been added back into supply with “0” demand and “0” revenue. An exception has been made via a permanent closures analysis (see next point).
No changes have been made to the methodology compared with the February 2021 forecast. The methodology compares current performance for each market against the worst period of the Global Financial Crisis (GFC) to determine the extent to which hotels are more adversely impacted by the pandemic. This is then applied to the permanent closures observed during the GFC period to determine a new rate of permanent closures during the pandemic. Closures are assumed to take place over a 3-year period starting with April 2020, compared with 5 years during the GFC. Half of these closures are assumed to occur in the first year while the remainder is spread across the following two years. All permanent closures that have occurred to date have been removed.
In Tokyo and Dubai, respective hosts of the Olympics and EXPO, the phasing of these closures was adjusted to expect a lower weighting of closures in year 1 than in the following 2 years.