Asian hotels still see room for growth despite yuan devaluation

While room rates may continue to fall amid the currency war in Asia, Hotel.com Asia-Pacific head Abhiram Chowdhry sees it as an opportunity to boost demand. Photo: Edmond So

A weaker yuan might hurt in the short term but won't pose a big problem for Asia's hotel industry as Chinese outbound travel demand is still increasing amid Asia's currency war, an industry veteran said.

"This is just a small change. I don't think it has a big impact," said Abhiram Chowdhry, Asia-Pacific vice-president of Hotels.com a leading online accommodation booking website. "In the short term, mainland travellers do become more cost cautious and hotel prices may go down, but the number of travellers is still growing."

In its latest report, the China Tourism Academy predicts a 16 per cent rise in Chinese outbound trips this year, compared with the 19 per cent growth seen last year.

"The yuan has recently devalued, but there have been other currencies that have devalued more, for example, the Australian dollar and Japanese yen," Chowdhry said. "It could still be cheap for the Chinese traveller."

China became the world's biggest outbound travel market in 2012 and has kept growing, which meant the sudden devaluation of the yuan by just over 3 per cent last month worried hotel operators.

"The fast growth of outbound tourism will be affected by recent yuan [devaluation]," said Jeremy Xu, executive director of China Travel International Investment (CTII), which operates 4-star hotels in Hong Kong. However, he added that travel demand was still strong as the number of outbound tourists had only reached 110 million - or a tenth of China's population - last year.

As a result of Asian currency depreciation, the average price of a hotel room in Asia fell 3 per cent year on year in the first half of this year, with average room rates down 16 per cent in Seoul - which was hit by a Middle East respiratory syndrome scare - and 7 per cent in Tokyo, according to the latest data from Hotels.com

Chowdhry said room rates might continue to trend down amid the currency war in Asia, but he viewed it as an opportunity for hotels to boost demand.

Based on Hotels.com's figures, interest in popular destinations like Japan continues to grow by as much as 120 per cent year on year, based on the number of searches from China around the upcoming golden week national holiday, with searches for the United States up 84 per cent and Thailand 39 per cent.

"Chinese do travel smarter, and more and more are shifting to use booking websites to find the best price rather than travel agencies," Chowdhry said. "For hotels, it is also a good chance to differentiate yourself from competition if you are able to segment the market and reach out to customers from China directly.

"Things like free Wi-fi and Chinese-speaking staff top Chinese travellers' requests."

He Lei, a Shanghai resident who travels overseas more than twice a year, said she would not cut back her travel plans because of the weak yuan. "A little change in price is affordable as I don't stay long, but I might do less shopping," she said.

Destinations such as Hong Kong, famous for its shopping and largely dependent on mainland Chinese tourists, will see more of an impact from the yuan's decline. The Hong Kong tourism industry has seen tough times this year due to the strong local dollar and increasing competition from markets like Japan and Taiwan, that loosened visa restrictions for mainland tourists. For example, the luxury Peninsula Hong Kong hotel reported that its second-quarter average room rate fell 15 per cent year on year.

Michael Li, executive director of the Federation of Hong Kong Hotel Owners, said many 3- and 4-star hotels had to offer discounts of more than 20 per cent to attract customers, but the overall occupancy rate was comparatively stable. "Hotels have already discounted too much; this is not a good trend," he said. "We need to find other ways."

Hoteliers in Hong Kong are taking different measures to cope with the headwinds. Xu said that CTII had been renovating hotel rooms, and the price of the renovated rooms was up HK$100 on average. "The industry is transitioning," he said. "Many of us are now trying to attract customers from those mainland provinces where people have never been to Hong Kong."

The Hong Kong Tourism Board also wants to diversify the tourist base and has spent HK$80 million conducting promotions across Asia-Pacific.

Chowdhry remains positive about the prospects for Hong Kong hotels.

"Hong Kong is still a very important hub for transit," he said. "With the growth of outbound Chinese travellers and people visiting China, Hong Kong will share more stop-over visits.

"But Hong Kong hotels do need to be better prepared and be friendlier to customers."

This article appeared in the South China Morning Post print edition as Hotels still see

Source: Asian hotels still see room for growth despite yuan devaluation