By Kaitlin Dunn, Writer, Hospitality Sales & Marketing Association International (HSMAI)
More than 20 presenters from around the world spoke to their expertise in the field of revenue management at HSMAI’s first-ever ROC@Home virtual event on June 17. Four of the most popular and timely sessions were given by economists in each of HSMAI’s global regions — Americas, Asia-Pacific, Middle East, and Europe. Here are highlights from their presentations on how they see COVID-19 affecting their regions as well as their outlook for the future.
From HSMAI Americas: Shawn DuBravac, President, Avrio Institute
DuBravac predicts that while recovery will begin in Q3 of this year, the overall economy won’t get back to pre-COVID levels until at least the end of 2021 or the beginning of 2022, which is similar to other recovery data sets such as the hotel industry and personal income. However, a second wave of coronavirus that forces more business closures would slow the recovery. DuBravac said that his forecasting is based on a vaccine being widely available by early to mid 2021 and there being no further country-wide lockdowns.
Unemployment, DuBravac said, will take a longer time to recover than the economy. “In the last recession, it took 77 months for unemployment to get back to what it was,” DuBravac said. “We are in the doorway of another expansionary period, but unemployment will remain stubbornly high.”
“You could argue that the recession is over already,” DuBravac added. While this recession is very steep and deep, there are reasons to believe that it’s bottoming out quickly compared to the last recession, when the economy deteriorated for more than a year until it was officially declared a recession. “Recessions tend to end somewhere between initial unemployment claims spiking and continued claims spiking,” he said. “We saw initial claims peak in April and continued claims spike in May, so you could make the case that the recession has already ended and we are in a recovery period. “It will be a rough recovery, but nonetheless a recovery period.”
Interest in travel is beginning to pick up, bringing opportunities for the hospitality industry to revamp. “It’s a whole new dynamic that will have to be figured out,” DuBravac said. Business travel, he continued, will be the hardest piece to put into place, as the decision to allow employees to travel likely will be made by someone judging the risk of catching the virus rather than someone who understands more about why an employee needs to travel. However, DuBravac thinks that the decision- making process will begin to return to normal by 2021.
From HSMAI Asia-Pacific: Tony Webber, Director, Air Intelligence
Webber is predicting a massive drop in tourism based on what he has seen from airline travel over the past few months. “We’re likely to see a large number of economies that will be at their weakest points in modern history, largely because of income constraints, liquidity constraints, and confidence effects,” Webber said. People will be experiencing loss of income and won’t have any discretionary spending, and they may not have enough confidence in hotels and airlines to make travel worth it, he explained.
Webber shared an April 2020 forecast from the International Monetary Fund that drops expected economic growth — from initial predictions in October 2019 — by 5 percent in developing Asian nations, 6 percent in Hong Kong, 4.5 percent in Singapore, and a whopping 9 percent in Australia and 10 percent in New Zealand. The larger drops are partially the result of non-COVID complications, such as the Hong Kong protests and the Australian brushfires. Another cause is that Australia and New Zealand had some of the world’s strictest lockdowns. Webber predicts that most Asian and Pacific countries’ GDPs will return to 2019 levels by the end of 2022.
There’s no clear answer on if or when business travel will come back, especially since companies have found so many ways to do business virtually, but Webber doesn’t think that it will completely go away, because there is so much that can’t be replicated online. “Allowing an employee to go on a business trip is a return-on-investment decision,” Webber said. “The costs associated with videoconferencing will be less than traveling, but will they get the same return on investment as if they had done a face-to-face meeting?”
From HSMAI Middle East: Mohamed Abu Basha, Director and Head of Macroeconomic Analysis, EFG Hermes Holding
Abu Basha showed data from his company that predicts a decline in growth in each Middle East country for the rest of the year, varying from -2 percent (Egypt) to -6 percent (Dubai). This forecast does not take into account any oil-based economic growth or decline. Dubai, he explained, went into major lockdowns and doesn’t have a diverse economy to rely on, while Egypt is on the other end of the spectrum on both accounts.
The overall negative picture for the Middle East has been compounded by a large drop in oil prices from the beginning of the year, the region’s second such drop in five years. Abu Basha said he expects oil prices to remain low for quite some time, which will lead to large job losses in the next 12 to 18 months. Dubai in particular will be slow to recover. “COVID-19 has fast-forwarded a lot of the challenges that Dubai was bound to see anyway,” Abu Basha said.
Tourism is a potential bright spot in the region, Abu Basah said, as it has been growing over the past two years — particularly in Saudi Arabia. While Saudi tourists themselves typically travel around the world, Abu Basha predicted that the coming year will see more tourism in Saudi nationals’ local areas. “They might not be able to spend a lot of money and go abroad,” he said, “so they are prone to start to have more entertainment at home, which could be a good opportunity for growth in the Saudi market.”
From HSMAI Europe: Harald Magnus Andreassen, Chief Economist, First Securities
“Lockdowns or not, we have seen decreases in occupancy from 75 percent to 100 percent,” Andreassen said. European countries had different levels of lockdowns, from Spain and Italy, which were completely shut down for a while, to Sweden, which never really experienced a lockdown. However, hotel occupancy numbers remained the same, no matter what the countries’ travel policies were.
While borders between European countries are slowly opening this summer, Andreassen said he doesn’t expect to see a lot of international travel. But one benefit of tourists not being able to travel abroad is a potential for domestic tourism to increase in each country. “Usually there is a close correlation between growth in the economy and activity in hotels,” Andreassen said. “But right now, the GDP is down 15 percent, while hotel activity is down 85 percent. We cannot use the normal correlations, but it also shows we don’t need a strong economy to get people back to hotels. That depends more on how we are able to live with the virus.”
Andreassen said that overall he is optimistic with regard to an economic recovery, mainly due to the governmental policy decisions that were made, including giving financial assistance to households, giving companies money to pay employees, and ensuring that central banks and financial markets do not collapse. “No doubt those extreme policy measures taken in all countries have been and will be an important element in the recovery,” he said. “Activity is beginning to increase.”
To get an all-access pass that allows you to watch all of the presentations from ROC@Home in full, visit https://roc-home.heysummit.com/