As domestic tourism returns, hotel industry looks for bright spots

Local travel has been picking up after months of lockdown

June 09, 2020

(Photo by ED JONES/AFP via Getty Images)

Last month, China celebrated the tenth anniversary of its annual campaign to promote domestic tourism. But this year’s China Tourism Day took on a quirkier and more urgent tone due to COVID-19.

Efforts to encourage travel after months of lockdown included online tours, livestreaming local produce, and promotional tactics like having the chairman of Chinese travel agency donning costumes to hawk discounted hotel bookings.

There was good reason for the extra effort: With the global pandemic having grounded most tourism, the hospitality industry is banking on domestic travel to be the first stop on the path to recovery.

In Asia, there are signs that this is where tourism will reboot first. Nearly 115 million trips were taken during the long weekend of China’s May Day holiday last month, according to the country’s Ministry of Culture and Tourism. Visitor arrivals to the island of Jeju in South Korea totalled 190,000 for the equivalent national holiday in early May, according to the Jeju Tourism Association.

“As lockdown restrictions are starting to ease in countries across Asia, we’re beginning to see both consumers act on their pent-up appetite for travel, and governments encouraging them to travel domestically,” says Charlie MacIldowie, Senior Vice President – Investment Sales Asia at JLL's Hotels & Hospitality Group.

Lifeline for hotels

Governments, keenly aware of the economic contributions from tourism, are rolling out policies to support locals wanting to get out and see some of their own countries. In Thailand, where tourism accounted for 11 percent of gross domestic product last year, the government has announced plans to woo local tourists from July.

In Japan, where travellers from 111 countries are banned, the government is footing the bill for domestic travel to a tune of US$185 a day through the distribution of discounts and vouchers for accommodation, shopping and dining.

Efforts across the Asia Pacific region “will lead to some rebound for hotel occupancy,” MacIldowie says.

Right now, he says the focus for several investors and hotel operators have switched to locations that were previously not on their radar: hot spots catering to large domestic markets.

Pockets of optimism

The island chain of Okinawa had a 77% share of domestic visitation in 2019, and boasted an average accommodation spend by domestic travellers of JPY 11,270 per visitor per night, the highest of any prefecture in Japan, according to the Japanese Ministry of Land, Infrastructure, Transport and Tourism.

Jeju, an island of beach resorts and volcanic landscapes in South Korea, enjoyed a 90% share of domestic visitation last year.

“These are the types of places we expect people to flock to again as domestic travel restrictions lift,” says Giuliano Esposito, Senior Vice President, Strategic Advisory and Asset Management, JLL Hotels and Hospitality Group, noting airlines have added routes to Jeju to bring flight frequency back to almost those pre-Covid times.

Locations within easy reach of large cities – such as Hangzhou, China, and Pattaya, Thailand – also present prospects for travellers looking to avoid flying at the moment, he says.

“Hangzhou welcomed close to 5 million visitors, with hotel occupancy averaging above 45%, during the recent Labour Day holidays, while Ho Chi Minh City benefits from a strong base of domestic business and leisure demand, representing 79% of total visitors to the city in 2019,” Esposito says.

Staycation nations

With rules around international air travel unclear, and plans around initiatives such as “travel bubbles” still being ironed out, the staycation market is likely to be the main route for most holiday-makers.

“The staycation market will help lift the hotel sector out of the doldrums if managed correctly,” says Esposito. “Long weekends and discounted stays will entice travellers to stay at hotels. However, it remains to be seen how social distancing and other measures will impact this type of demand.”

Hotels sweetening offers for domestic guests with discounts, greater flexibility and longer booking periods. Marriott has extended significant savings for its South Asian properties and are allowing guests to book to stays right till June next year.  

“While the region as a whole requires the resumption of international travel for a meaningful recovery, if you look at markets on a more granular level, there are pockets of optimism that investors and operators should be adding to their radars in the search of unique opportunities,” Macildowie says.

Which hotel markets will recover first?