The outlook is rosy for the hotel market in Beijing and Shanghai
in the next two years, with the 2008 Beijing Olympics and 2010
Shanghai World Expo just around the corner, according to
consultancy firm Jones Lang LaSalle Hotels.
Andreas Flaig, executive vice-president of Jones Lang LaSalle
Hotels, expects the number of rooms at internationally branded
hotels in Shanghai to grow 76 percent to 33,000 by 2010, while
Beijing's total will more than double to 27,000 by 2009.
"The international brands are in a race against time to be ready
for the 2008 Beijing Olympics and the 2010 World Expo," Flaig said.
He expects foreign operators to considerably boost their presence
on the mainland.
About 27,000 branded hotel rooms will be rolled out in Shanghai
this year, 8,240 of which will be new, according to Jones Lang
LaSalle Hotels research.
Many world-class hotels are in the pipeline for the two cities.
A 190-room Four Seasons hotel will be opened in Shanghai's Pudong
District next year, while a Mandarin Oriental hotel with 203 rooms
is also scheduled to open in 2008 in Beijing's Chaoyang
District.
Flaig said the vibrant economy and tourism industry of the two
cities is creating strong demand for the hospitality sector that
could be sustained well into the next decade.
"The mainland has the largest domestic tourism market in the
world. With growing affluence and better internal travel networks,
the domestic traveler will become a key source of demand for a
variety of hotel categories - from budget to luxury hotels," he
said.
Between 1997 and 2006, international tourist arrivals to Beijing
increased at a CAAG (compound average annual growth) rate of 8.1
percent and 13.5 percent for Shanghai. The number of inbound
tourists to both Beijing and Shanghai reached a new high last
year.
Luxury hotels in Shanghai and Beijing are also seeing strong
revenue growth.
The ADR (average daily rate) of five-star hotels in Shanghai
surpassed the 1,700-yuan mark for the first time in 2006. The
city's ADR tops other mainland cities, and is 33 percent higher
than Beijing's.
Flaig predicted ADR growth in Shanghai of 5 percent for 2007,
while the occupancy rates of the five-star hotels is expected to
pick up moderately.
Last year, Beijing's five-star hotels achieved the highest
RevPAR (revenue per available room) since 1994. RevPAR for the
first six months of the year has outperformed the same period in
2006. A similar pattern was observed in the four-star segment.
Regional investors from Hong Kong have actively pursued
investment opportunities in key gateway cities such as Beijing and
Shanghai as well as in second-tier cities. Hong Kong investors were
involved in eight out of the 20 major hotel transactions this
year.
But Flaig said overseas investors tended to target second-tier
cities because of lower land cost. "Land constitutes the most
significant cost for hotel development. Building hotels in
second-tier cities can help investors raise their
profitability."
Flaig said the growing popularity of budget hotels is having an
impact on the one- and two-star hotels. "The budget hotels offer
very competitive prices of less than 200 yuan per night... so they
(one- and two-star hotels) are forced to either mark down prices or
refurbish their outfits."
(China Daily September 21, 2007)
