China’s evolving hotel market boosts occupancy rates

Shanghai Photo: Wilsonhui

China’s hotel market is evolving. The country has long been a destination for business travellers, but China is now embracing leisure tourism more than ever before, both domestically and internationally.

China’s hotel market was largely stable in 2015, according to official figures, with occupancy rates up in first-tier cities and the three-, four- and five-star sectors.

Occupancy rates have been trending up in first-tier cities now for close on three years and hotel operators are starting to feel comfortable enough to begin to raise average daily rates (ADRs), notes Savills.

The shift in the country’s tourism industry can be seen most of all in the emergence of theme parks and other major attractions. Mainland China saw 11 theme parks make the top 20 most visited Asia Pacific parks in 2015, according to the annual TEA/AECOM 2015 report. Combined, they saw over 39.5 million visitors in 2014.

“Theme park development in China, with the active support of the government, is expected to spur growth in domestic tourism in China’s key cities and help to catalyse the economic shift to the service and entertainment sectors,” comments James Macdonald, Savills Research.

Five-star hotel occupancy rates in the last year have hit the highest level in some time, up 4.6 percentage points since the market’s 2013 trough. Second and third-tier cities are below their 2011 peaks, but the former are beginning to recover their lost occupancy rates, with strong growth highlighted by Savills in Nanjing, Hangzhou and Xiamen.

“ADRs have in large part responded to the trends seen in occupancy rates, with hotels in the second- and thirdtier cities continuing to reduce ADRs in an attempt to win more business from competing projects. First-tier cities have seen ADRs largely stabilise over the last two years, with some hotels starting to apply moderate hikes to ADRs over the last year,” comments Savills.

While hotels are shifting from business to leisure visitors, though, there is no guarantee that ADRs will continue increasing. Indeed, Chinese tourists are famous for being frugal with their spending on accommodation, although they are willing to splash out on local products and delicacies. The pressure on ADRs is exacerbated by the rise of a younger generation of travellers, who place more importance on experience over facilities and quality.

“The rapidly enlarging middle class, and rising income levels that have shifted consumption from essentials to non-essentials, and products to experiences, will favour some hotels and locations over others,” observes Savills’ report.

Indeed, Shanghai continues to lead the pack, with the highest ADR of the top ten largest markets. The city also has the third highest occupancy rate after Shenzhen and Xiamen, giving it a RevPAR of RMB674. Guangzhou is the next highest at RMB556. The third and fourth largest fivestar hotel markets, Suzhou (28 hotels) and Chongqing (27 hotels), however, continue to suffer from over supply, with occupancy rates of 59 per cent and 55 per cent respectively, and ADRs below RMB600.

 

Comments

comments