Hotels start to bounce back - Business Travel - from severe acute respiratory syndrome and war in Iraq

Business Asia, June, 2003

Hoteliers, airlines and tour operators have suffered this year as slowing economies, the outbreak of severe acute respiratory syndrome and the war in Iraq deterred people from travelling. These factors extended a sales drought started by the terror attacks on the US in 2001, creating the worst slump the industry has seen since the 1930s.

InterContinental Hotels Group and Marriott International, the world's second and third-largest hotel companies, both say they expect a rebound in demand for their rooms to be delayed until next year.

JW "Bill" Marriott Jr, chief executive officer of Marriott International, says that recovery will start to be seen in 2004, while InterContinental's chairman Ian Prosser is cautiously optimistic.

"I don't rule out a recovery this year, but I think any recovery in 2003 is likely to be slow," Prosser says.

SARS burden

The latest burden on the industry has come in the form of SARS, the form of pneumonia that has dampened the demand rebound expected after the end of the war in Iraq.

Concern about the disease will cut business in the travel industry by 40 per cent this year in the regions worst affected, according to the World Travel and Tourism Council (WTTC).

A study conducted by the WTTC says that about 2.9 million people employed in the industry in China, Hong Kong, Singapore and Vietnam will lose their jobs as SARS spreads.

China, which has about two-thirds of worldwide infections, will shed 2.8 million jobs and a quarter of its tourism industry's contribution to gross domestic product, the study says.

Slow growth

Mark DeCocinis, general manager of the Portman Ritz-Carlton Shanghai, says that business in the city has increasingly been affected by SARS, with an estimated loss of revenue to Shanghai hotels for April and May being around US$125 million ($189 million). "We expect slow growth in occupancy June, July and August, leading to a moderate recovery for the balance of 2003," DeCocinis says.

Business travellers, who often pay more for rooms than leisure travellers, will be key to a rebound. "Business people must see the customer in order to grow and develop their business. We continue to receive business people to our hotel from North America, Europe and Asia," DeCocinis says.

Starwood, InterContinental and other hotel operators also say expansion plans in China will continue, betting China's 2001 entry into the World Trade Organization and the 2008 Olympic Games will boost arrivals.