SYDNEY — For hoteliers and investors in Australia and New Zealand, two burning issues are coming to the forefront — lower occupancies and staff shortages.
A dearth of international visitors is fueling the occupancy lag, but staffing problems are exacerbating it, said panelists at session titled “Views from the boardroom” at the Australia-New Zealand edition of the Hotel Investment Conference Asia-Pacific.
“I think it is a Down Under challenge,” said Jane Hastings, CEO at hospitality and leisure company Event Hospitality & Entertainment, of the visitor shortfalls.
Hoteliers are pushing average daily rate to fill the gap, panelists said.
John Stawyskyj, who leads hotel and leisure projects at legal firm Ashurst, said he wonders if ADR “above pre-pandemic levels” is sustainable.
“Consumer confidence is a real issue as to whether we’re starting to kill the golden goose with pricing,” he said, “because we’re relying on pricing and ADR as opposed to occupancy to sustain the industry.”
Leanne Harwood, senior vice president, Japan and Asia-Pacific, at IHG Hotels & Resorts and the president of Australia’s Accommodation Association, said the region’s challenge continues to be “that we can’t run full occupancies across the board.”
Harwood said she still believes the recovery is well underway.
“We know that our cities have lagged significantly for a number of months and that the leisure-bound industry has enabled us to keep our head above water. But we’re seeing meetings returning; we’re seeing business travel starting to come back in,” she said.
“We’re starting to have that flow of internationals coming through, and we’re running at 90% of where we were, that’s without truly a large increase in international travel yet. So, as an industry, we’ve got to be in a good mindset about all of that,” she added.
Trent Fraser, CEO of Choice Hotels Asia-Pacific, said optimism is widespread and hoteliers are surprised at how quickly the industry has recovered in 2022.
“We’re not seeing much of a fall off, even through these winter months. It’s still performing really, really strongly,” Fraser said, adding he expects an uptick in performance as the Southern Hemisphere summer approaches.
“Probably with a bit more of the transient business coming in from overseas for the Northern Hemisphere winter. So, we’re looking at the rest of the year thinking it’s going to be a really strong finish,” he added.
Tourism Australia Managing Director Phillipa Harrison said her figures suggest 55% of international visitors have not returned.
“We have a net deficit in terms of inbound tourism in this country, but that deficit is coming back,” she said.
Graham Perry, managing director for Australasia at BWH Hotel Group, said there has been overall improvement, but the firm's hotels in regional markets are performing better than those in capital cities.
“We have 30% of our properties that we count as cities, and 70% regional. We’re sitting on an occupancy across the board above 2019,” he said. "I think international markets are going to come back in the midterm and hopefully even China in the long term.”
Jan Smits, CEO for Asia-Pacific and deputy chairman at owner Pro-invest Group, said his firm's hotels are faring above average in terms of occupancy.
“The recovery is fantastic. … Across our portfolio we’re at about 70% to 75% of 2019 levels. For us, it’s also a little bit hard to measure because in 2019 we had 1,500 rooms, and now we’ve got 5,000 rooms. We opened a lot of product that was still stabilizing in the market over that period.
“But I think the great thing is that we finally learned to drive ADR in some of the key cities, because pre-pandemic, we would be running at 85% and ADR was absolutely flat, so actually seeing that growth has been fantastic,” he said.
Smits said guests seem to have been “forgiving” about price hikes.
“We were anticipating a dip in customer engagement scores, as we were driving this real growth in ADR, but it’s actually been quite stable and consistent,” he said.
Labor Shortage
Skills shortages are chipping away at the positivity emanating from higher occupancy levels, panelists said.
“It’s the largest drag factor and issue,” Stawyskyj said.
He said hoteliers cringe at the thought of capping occupancy.
IHG’s Harwood said one New Zealand hotelier told her “the market was looking extremely buoyant, particularly in Queenstown."
"He was saying that hotels are still having to cap occupancies, and that’s horrific. Absolutely horrific to think that we’ve been through two years of challenges, where the industry’s been on its knees, and we’ve got the opportunity, we’ve got the demand and yet we’re not able to open our hotels and run them at full occupancy,” she said.
“Those quality rates that we’re seeing are sustaining us. But we absolutely have to beat the issue of our labor challenges. Otherwise, we’re going to continue to be running not at our full potential, and that is just not acceptable,” she added.
Choice Hotels’ Fraser said the hotel industry staffing crisis is having a negative fallout across Australia.
“A lot of our operators are small-type operators in regional markets — very, very hands-on, which makes it very difficult for them. We’re seeing the opposite of what we saw in the pandemic. We’re seeing cases of close to burnout. Demand has increased so much, they just haven’t got the people on the ground,” he said.
BWH Hotel Group’s Perry said “a mass exodus” of staff is negatively affecting the service hotels can provide, and that is a bigger problem than usual because of the higher rates.
“We’ve got a lot of new business from domestic [guests], and they’re having to pay big prices. And the trouble is we don’t have the staff and the services. So, we have to be really careful about that,” he added.
Perry said hoteliers affiliated with Best Western had been “trying to cap occupancies” by constantly raising rates every week. “And there has just been no ceiling to it … and it just shows the strength of that demand.”
For Pro-invest, “the labor issue hasn’t been that big,” Smits said.
“We’re in a bit of a different situation because 2,500 of those rooms are select-service … and for us, the predominant labor issue is in the restaurants and bar side of full-service hotels. When it comes to the Holiday Inn Express portfolio, it’s mainly outsourced. We had some struggles earlier on, but it’s really sort of stabilized,” he added.
Perry said the need for adaptation in solving labor problems has never been so pronounced.
Fraser said the solution starts with “providing pathways” for employees.
“The focus on people has never been more important. The rate-driven recovery and what we’re doing for our teams are the most important takeaways,” he added.