As of Saturday, 28th March, the conflict in West Asia has run on for a month and there seems to be no end in sight as yet.
We have already pointed out the impact of the ongoing war on the region’s tourism and aviation sectors relative to the global industry, and have provided updates for those travelling within the region or who are still in the planning stages.
With that in mind, we shift our spotlight now to the hospitality sector which, along with regional MICE, is among the sectors hardest hit by the suspension in travel.
What will this prolonged conflict mean for hospitality within West Asia and, by extension, that in the rest of the world?
A tale of loss
A 28th March report from The New Indian Express stated that hotel occupancy in much of West Asia has gone down to single digits.
But it isn’t just hotels within the region which are facing the dilemma of decreased stays; hotels elsewhere are also confronting the impact of fewer travellers booking rooms.
Chief executive Anuraag Bhatnagar of India’s The Leela Hotels remarked: ““We have seen a series of cancellations. It seems that most of the delegations and the groups that were coming in, especially from the Middle East, were cancelled and certain programs are pushed back more into the future quarters.”
It would not have mattered so much as the conflict came towards the end of the peak season for West Asian tourism, but the fact that there appears to be no end in sight is expected to have serious repercussions on tourism and hospitality, especially given that both regional airspace and sea travel remain hampered.
As Global Hotel Alliance (GHA) chief executive Christopher Hartley explained: “Airlift into these markets has dried up. This is why hotels in this region are experiencing a crisis. So in the short term, the Middle East is pretty tough. We're also at the end of the high season there, meaning the impact will continue but it will be less severe as the coming months are an off-season period anyway.”
A matter of fuel and costs
Likewise, Peachtree Group CEO Greg Friedman pointed out how higher energy rates, driven primarily by the scarcity of crude oil from the region, will put pressure on the hospitality sector to meet its profit margins throughout this year.
Friedman said: “Higher airfare and gasoline influence discretionary travel. Lower-tier and heavily levered assets tend to feel it first. [And] this isn’t purely a rate story: it’s a liquidity and volatility story.”
For Friedman and many other experts keeping an eye on the crisis, the hospitality sector should brace itself for wider bid-ask spreads, as well as recapitalisation and structured solutions.
As he said by way of explanation: “Volatility persists until uncertainty gets priced. Markets don’t fear bad news; they fear unknown duration.”
Indeed, even as a full month has passed since the first airstrikes, the world continues to wonder how much longer the war will last and, with it, difficult times for industries that contribute greatly to both the regional and global economies.
