Are travel incentives lifting demand in the hotel sector?

Are travel incentives lifting demand in the hotel sector?

In a previous whitepaper, STR analyzed the short-term impact of travel incentives in select countries around the world. With additional months of data at our disposal, we take another look at countries that have implemented various incentives to help increase demand lost to the global pandemic.

While domestic travel has been the focus to boost tourism, some countries furthered measures to attract international guests via special visas, promotions and by emphasizing health and safety processes.

To start, we looked at total-year 2020 data to see which countries offering such incentives were able to move closest to pre-pandemic levels.

Japan, which was to host the Summer Olympics in 2020, tightened its borders for international travel, but never fully implemented a lockdown. As a result, domestic and business travel kept occupancy above 20% during the worst points of the pandemic. Daily levels then climbed as high as 55% in December. Aiming to further drive domestic demand, Japan launched “Go To Travel” at the end of July, offering room discounts and vouchers to be used by guests during their accommodations stay. This led to an increase in occupancy and average daily rate (ADR), mostly seen over weekends. Markets like Chugoku & Shikoku, Kanto and Tohoku saw better than 53% occupancy in December with an overall occupancy in Japan of 43%. These performances may dip, however, as a third wave of cases reached the country and the government decided on suspending the holiday campaign at the end of December.

While countries have been looking at administrative solutions to attract international guests, others are incentivizing domestic travel in the near-term. Thailand had seen its occupancy drop to single digits in April (7.8%), but levels steadily increased to just shy of 30% in December. In July, the government launched “We Travel Together,” a campaign in which national passport guests would receive vouchers and discounts that would be more advantageous for longer stays. As already shown across the globe, regional markets and weekends have produced higher occupancy thanks to leisure travel. That also is the case with Thailand as STR-defined markets like Thailand Central and North (comprising Chiang Mai, Hua Hin and Pattaya submarkets) reached 55.7% on 8 August and 63% on 26 September. On the contrary, Bangkok has plateaued around 20% with higher occupancy levels on weekdays.

Moving continents, we look at Mauritius, which like most markets is now counting on long stays to revive its tourism industry. Demand all but stalled until the very beginning of August when the country was sitting at an average occupancy of just 3.2%. Most recently, the festive period provided relief and occupancy close to 2019 levels—24 and 25 December produced respective occupancy levels of 60.8% and 72.7%. Levels then grew to 79.3% on 2 January 2021. The East African island has focused on its tourism sector post-pandemic with the organization of a virtual tourism exhibition for the Saudi Arabia and Middle East markets in August and the introduction of a new Premium Visa later in the year. This visa is valid for a period of one year and renewable for guests that wish to work away from home in a COVID-safe environment on the condition that a traveler’s source of income is outside of the island.

Working remotely has become a worldwide trend as a solution to the restrictions imposed by various governments. Alongside this movement, Barbados proposed a one-year Welcome Stamp starting in July 2020. This visa authorizes travelers to live and work remotely from the island for a maximum of 12 months. The Caribbean country experienced its most significant year-over-year occupancy decline (-92.1%) in June. After launching the above-mentioned campaign, the destination reached double-digit levels in occupancy, including a mark of 44.3% in December—a level also boosted by the holidays.

Another country introducing new visa regulations during the late summer months was Egypt. This aligned with discounts on cultural attractions and airline price reductions. Egypt is supporting both the traveler’s community and the country’s tourism industry. Committed to bringing tourism back to the market, The Ministry of Tourism and Antiquities is offering further discounts to museums and archaeological sites, as well as visitors’ permits to foreign travelers. On a different note, the cabinet chose to provide emergency relief funds and utility compensations for the tourism business. All incentives initially proposed in July had eventually been extended to the winter season. In the second half of the year, the country saw more stable occupancy figures with a December YTD level of 27.9%.

Maldives occupancy was down 95.7% in June 2020 compared with the same month in 2019. After the reopening of borders in mid-July, demand slowly improved but reflected a real rebound in occupancy due to international travel in December. As an example, Qatar Airways offered travel bubble holiday packages to their nationals and residents in a bid to improve airline traffic—this benefitted Maldives. The country also launched the “Maldives Border Miles,” a loyalty rewards program emphasizing frequency and duration of each stay: points earned translate to room, food and activities discounts. Additionally, jumping on the new work-from-home reality, some luxury class properties have begun offering workcation packages for long-stay guests.

Other destinations have turned to financial incentives to boost tourism, an approach seen in the "#Come2MexicanCaribbean " campaign, which consists of complimentary accommodation, car rental and plane tickets when half a holiday is paid. Following the June campaign launch, occupancy in Cancun has steadily improved, reaching 47.5% in December from a dismal starting point of 8.5% in June. However, some may argue that the financial element will not be enough to enhance travel if health issues are not addressed.

Cyprus, a destination that has opened its borders to 56 countries, has focused its advertising and travel incentive efforts on health and safety concerns. In December 2020, the country reinforced its promise to provide for living costs and medical expenses of tourists catching the virus. While many travelers are taking into consideration such incentives when looking for a destination, Cyprus had only experienced growth in occupancy during the late summer season—August being the best month (35% occupancy).

Conclusion
Countries have implemented different incentives to boost travel and palliate the effect brought by the pandemic. Data shows a real interest in travel, and as restrictions changes, flexibility in policies, financial incentives and promoting a safe environment have become key in travelers’ decisions.