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COVID-19 impacts expected to force Asia hotel sales in 2021

A recent survey from Singapore-based Hospitality Asset Managers Association found that Singapore owners are optimistic. This despite asset managers reporting that in Singapore, 78% of the properties (87.5% outside Singapore) will see a greater than 50% drop in RevPAR this year and over three quarters do not expect a rebound to 2019 levels until 2023 or later (10% say 2025).

Lenders have been quite flexible with borrowers to date, but the survey indicates that, even in Singapore owners may look at selling assets to reduce debt. Outside Singapore, 12.5% are thinking about selling assets to reduce debt and almost 19% are considering passing the keys to lenders to resolve situations where liabilities exceed current value. These owners feel that lenders, who themselves will see more pressure from regulators, will become less flexible with hotel owners. 

In Singapore, 71% of those surveyed feel this increased pressure will occur prior to the end of Q. Regionally, this type of unplanned hotel exit by owners has been the exception rather than the rule while much more common in North America, Oceania and Europe. 

The European HAMA Chapter’s survey highlighted that half its owners are considering alternative uses for their hotels and, on the acquisition side, more than half do not believe that the bottom, in terms of hotel pricing, has been reached yet. In the U.S., major cities have been severely impacted, with estimates of over 60,000 rooms in New York City, with many owners considering reopening as repurposed buildings.

A recent HAMA A/P Chapter member survey indicates that more than 60% of survey respondents have found lenders to be flexible during the pandemic. The majority also believed this leniency to diminish by Q2 and Q3 of 2021. Over 50% of asset managers expect a 50-75% decline in RevPAR compared to their original 2020 budget, according to our survey.

Going forward, the biggest concerns relate to demand, followed closely by employee related expenses, understandable due to the fixed cost structure of hotels. Expectations of RevPAR in 2021 show that generally owners expect RevPAR to be 40%-60% lower than 2019.

Markets such as Maldives, Bali and Phuket, which need international arrivals to thrive, have lagged the performance of other markets in 2020 with expectations similar for 2021.

How to manage the eventual ramp-up of demand with COVID regulation is still up in the air and highly inconsistent between countries. The owners of hotels have to survive this downturn and position themselves to benefit from opportunities which will be significant over the next five years.

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