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Marriott International, Inc. is planning its biggest Asian expansion, adding six properties in China as analysts warn oversupply may force five-star hotels to slash rates.
Marriott, Starwood Hotels & Resorts Worldwide Inc. - which runs the Sheraton and Westin hotels - Shangri-La Asia Ltd. and other companies are expanding on China's mainland, betting the country's 2001 entry into the World Trade Organization and the 2008 Olympic Games will boost visitor arrivals.
Since 1997, the number of five-star hotels on China's mainland has risen to 282 from 57, while four-star hotels have doubled to 386, according to the China National Tourism Administration. Analysts say that's crimping profits as it forces companies to cut rates.
Travelers can already get rooms in five-star hotels for as little as US$50 per night in secondary cities such as Kunming and Guilin, analysts said.
Marriott - which operates the Renaissance, Marriott and Ramada chains - opened its 32nd hotel in China last week and plans to add more mainland properties within two years.
"China is our No. 1 focus in the region," said Paul Foskey of Marriott's Asia Pacific hotel deve-lopment. "We have 19 projects in the pipelines, and about a third of them are in China."
The company plans to open three hotels in Shanghai, two in Dalian and one in Wuhan.
There may be an oversupply "in some markets, certainly, but there are markets that have been extremely successful like Shanghai and Beijing," Foskey said.
While the five-star occupancy rate in Beijing and Shanghai has been hovering at 70 percent, among the highest in the region, this may fall as more and more hotels open, analysts said.
"You'll see oversupply and price competition among hotel operators," said Natalie Chow, an analyst at Daiwa Institute of Research. "There will be a speed-up in consolidation."
Despite analysts skepticism, the big operators continue to expand.
Starwood plans to triple its presence in China to about 45 hotels during the next three years. This week, the world's biggest hotel group plans to open a Sheraton on Hainan Island.
Six Continents Plc - which operates the Holiday Inn and Inter-Continental chains - plans to add another six hotels to its 39.
Raffles Holdings Ltd., which owns Raffles Hotel in Singapore, said it wants to replicate that property in Shanghai, Hong Kong and other cities. And Shangri-La Asia Ltd. said it will spend US$400 million to expand its chain to 50 from 38 by 2005.
China is the world's fifth-most popular tourist destination, according to the World Tourism Organization, and is expected to overtake Italy, the U.S., Spain and France as the world's top tourist destination by 2020.
Last year, tourist arrivals into China grew 5.1 percent, while global tourism saw a decline of 0.6 percent, the world body said.
China National Tourism Administration Director He Guangwei expects 100 million inbound travelers this year. Taken with an estimated 900 million domestic travelers - more inclined to travel as an economy that grew 8 percent last year generates more disposable income - that means revenue of 600 billion yuan (US$72.5 billion).
Business travel will also be boosted by the nation's entry into the World Trade Organization in December 2001, while the 2008 Olympic Games in Beijing is expected to attract more than 500,000 visitors, according to the organizing committee.
"These Chinese cities represent a major opportunity for the hotels, and as China grows, the opportunity grows" said Nicholas Brooke, chairman of property consultant Insignia Brooke (Hong Kong) Ltd. "They don't have to follow, they have to be there first."
(eastday.com January 28, 2003)
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