Growth in occupancy rates in China’s urban hotels has relieved fears of oversupply in the hospitality sector.
Since 2010, a supply-demand imbalance has exerted pressure on China’s hotel industry, when vacancies abounded among China’s hotel rooms in the aftermath of major world events like the Shanghai World Expo and 2008 Beijing Olympics. The industry sustained another blow during government’s austerity push in 2013, which forced government workers to decrease their spending on business trips.
However, JLL recently reported that the occupancy rate of Shanghai-based hotels rose to 71 percent from 66.2 percent in 2012 last year, while the rate of hotels in Beijing increased to 63.6 percent from 59.5 percent.
According to Mandy Li, a senior vice president at JLL’s hotels and hospitality arm, the growth stems in part from the recent proliferation of Internet service firms in China, which require employees to travel for business more frequently. The country’s growing middle class is also a major driving force.
“The purchasing power of China’s middle class must have been underestimated when the gloomy sentiment dominated the hotel market,” Mandy Li said in an interview with the South China Morning Post. “The upward momentum looks set to continue and the long-term outlook appears to be bullish.”
Because of the middle class’s integral role in the hospitality sector, affordability is key. Ji Qi, who serves as chairman and chief executive of Huanzhu Hotels Group, which runs more than 1,800 hotels in 280 Chinese cities, says that fees of about 500 yuan (HK$624) per night at a four- or five-star hotel would be especially attractive to middle-class travelers in the summer and winter holiday seasons.
Ji also stressed that accommodations must be comfortable.
“China is a wonderful place and a great market for us to tap,” said Ji. “Demand for cozy hotel rooms and high-quality services is increasing, and hotels that can make visitors feel safe, reliable and comfortable will make profits.”
image credit: piero sierra