Skift Take

Emerging markets such as Thailand and Malaysia are considering “dual-rate structures,” where foreigners pay more for hotel stays than domestic travelers do. Will this help or hurt? Plus, other hotel deals and development news.

Sean O’Neill

Here are some excerpts from Daily Lodging Report from the past week. If you’re not a subscriber, you should be. Get news on hotel deals, development, stocks, and career moves. Sign up here, now.

Sunday, July 10

Service Properties Trust announced progress on its plan to sell 68 Sonesta branded hotels. To date, 57 hotels have been sold for $496.4 million. Another six are under purchase and sale agreements for about $37 million.

HN Capital Partners and Sage Hospitality announced the launch of a new lifestyle property, Hotel Per La, which will open at the site of the former Nomad Hotel in Downtown Los Angeles.  A member of Preferred Hotels & Resorts, the 12-story Hotel Per La will feature 241 guest rooms.

Skift Note: Expect even more properties to switch hands over the next 18 months. Some owners will get wrong-footed by rising interest rates and a possibly uneven return of business travel to downtown locations.

Monday, July 11,

There has been a lot of talk about dual rates by hoteliers in Thailand. The story started when Thailand’s tourism minister was reported by Bloomberg to be ready to ask hotel operators to implement a dual-tariff structure under which foreign visitors are charged rates similar to pre-pandemic days, while locals continue to get the discounted pandemic era prices.

The government confirmed this, saying reduced rates will be maintained for Thais to sustain the momentum of domestic tourism, while the higher rates for foreign tourists will maintain Thailand’s standard of rates and services for foreign tourists. Tourism authorities and a hotel association will hold talks about the dual pricing plan.

Skift Note: Poor Thailand. It’s only expecting 9.3 million foreign arrivals this year, compared with 40 million in 2019. Hotel developers have put 73 percent of new projects on hold. Meanwhile, Malaysia has been inspired by Thailand’s talk of dual pricing. See Thursday’s item below.

Tuesday, July 12

Chicago’s second-largest hotel could be getting a new owner after its lender received a foreclosure judgment for a more than $333 million default early in the pandemic. A Cook County judge issued the order against Thor Equities, the longtime owner of the Palmer House Hilton. The judgment, in favor of Wells Fargo Bank, set up a potential sale of the 1,641-room hotel. Wells Fargo could make a credit bid on the property in a sheriff’s foreclosure sale. 

Skift Note: Sounds like there’s still hope for investors in this hotel’s securitized debt.

Wednesday, July 13

JP Morgan analysts said that, after analyzing RevPAR performance across the Top 25 US markets, specifically looking at trends between weekdays and weekends, it continues to favor leisure over business travel. The firm’s takeaways include that RevPAR [revenue per available room] across all markets is benefiting from summer leisure travel; weekend RevPAR has tracked above 2019 levels given strong leisure demand while weekdays are below, though improved since earlier this year; Top 25 markets have underperformed suburban or smaller cities; and business center cities within Top 25 markets are lagging while leisure destinations are outperforming. ADRs, across the board, are driving RevPAR above 2019 levels, while occupancy is a few points below. JPM said if there are serious concerns about the consumer, they don’t know how it will not come back to impact corporate travel and cause a burn-off in recent multiple expansion, particularly if macro risks persist heading into the fall when corporate travel budgets for 2023 will be set.

A new JLL report said investment in the hotel sector in Asia Pacific had volumes of US$6.8 billion in the first half of 2022, reported The Business Times of Singapore. Capital deployment in the region was up 12% versus the same period in 2019. JLL is forecasting $2 billion in investment in the Chinese hotel sector this year. Australia and Thailand had a weak first half of the year, with investments of only $145.5 million and $37.7 million respectively. JLL is confident in its US$10 billion prediction for total Asia Pacific hotel investment volume in 2022.

Indian ratings agency ICRA said India’s hotel industry’s revenues and margins are expected to return to pre-Covid levels in 2022-2023. ICRA, a sibling of Moody’s, said the demand is expected to stem largely from domestic leisure and transient travel, with a gradual recovery in business travel and foreign tourist arrivals. 

Pan-India premium hotel occupancy is expected to be at 68-70 percent for FY2023, the ICRA report said. The average room rate is expected to hover around rupees 5,600-5,800. ICRA’s report said construction activity has restarted in a majority of deferred projects. The per-room cost is up by 10-15 percent because of cost inflation.

Skift Note: In India, the consolidation of independent hotels has been less than forecast because of shifting financial dynamics. Read the ICRA Hotels India report, here. The JPMorgan report is for its investors only, but it implies that the business travel recovery will be slower than many had expected in the fall. Not everyone agrees, though. Delta sees a boom ahead.

Thursday, July 14

The Malaysian Budget and Business Hotel Association is calling for a two-tier system for room rates, with foreigners paying more for accommodation than Malaysians. The MyBHA said the mechanism would help Malaysia’s hotel sector generate higher income while remaining competitive in the region. They hope the government will formulate a law to regulate online travel agencies and enforce the Short Term Residential Accommodation guidelines to ensure the survival of the hotel industry. The Malaysian Association of Hotels is proposing charging room rates in US dollars, something MyBHA agrees with as they believe this could reduce the price war between budget and luxury hotels. The budget hotels are competing with four and five star hotels that have slashed their room rates to gain business. The Malaysian Association of Hotel Owners is also endorsing the US dollar proposals, saying it would help increase confidence of foreign tourists of the hotel industry in Malaysia as well as increase the income of hotel operators. 

Minor Hotels said that after scouting Australia for a first-class location, they chose a $50 million, 4.5-star hotel to be built in Mooloolaba by young-gun developer Kenneth Wagner. The new 180-room hotel will be branded Avani Mooloolaba Beach Hotel, with construction to start in 2023 and the hotel to open to guests in 2025. The 13-story luxury development with a rooftop pool, bar and restaurant, café, shops, spa and gym is promising a five-star experience. Although Avani has some residences in Adelaide, the Gold Coast, and Melbourne, the new Mooloolaba build will be its first full-scale hotel in Australia. Developer Kenneth Wagner is director of development company KPAT Mooloolaba, which developed Minor’s Oaks Toowoomba Hotel.

Skift Note: Malaysia’s interest follows Thailand’s discussions. Other developing nations will be watching what they decide to possibly copy their moves.