International Hotels Face Challenges as They Invest in China’s Domestic Tourism

on June 21 2015 | in Travel | by | with No Comments

Hotel Ibis, Xi'an, Hotel Ibis Xi'an, Accor, China,

Despite the fervor over the growing spending power of China’s outbound tourists, China’s domestic travel and tourism market has been quietly surging.

By 2019, Chinese outbound tourists are projected to spend US$264 billion from 174 million tourists, which has led to a spate of overseas investments by international luxury hotel brands and Chinese investment companies, reports South China Morning Post.

After acquiring Groupe du Louvre last year, Jin Jiang International Holdings announced this month a memorandum of understanding with Prince Hotels of Japan. Fosun, after purchasing Club Med in February after a two year takeover battle, purchased a 5 percent stake in Thomas Cook. Anbang Insurance Group has also joined the hotel market with its purchase late last year of New York City’s Waldorf Astoria for US$1.95 billion.

Cross-border investment in hotels is expected to rise 15 percent this year to $68 billion globally.

Now, the focus is turning to China’s domestic tourism market, where the emphasis has been, until recently, on luxury hotels. With the rise in domestic travel by middle-class Chinese and business travel, international hotel brands are taking note.

InterContinental Hotels Group recently announced Hualuxe, its hotel brand for China, and plans to bring its hotels to 100 Chinese cities over the next two decades. Hilton, Marriott, and Sheraton have all also announced expansion plans in China.

Accor is well on its way to its goal of 100 new hotels in China it announced out in 2012. At the end of last year, China Lodging and Accor signed a deal to bring Accor’s mid-level Ibis brand to China. The deal gives the two companies access to a combined 47 million loyalty program members.

Many of these hotel brands are looking beyond China’s first-tier cities, and specifically toward western China. The “Beautiful China 2015 – Year of the Silk Road Tourism” campaign was launched early this year, which aims to integrate tourism centers along the route as it stretches westward across China.

However, China’s domestic tourism market does face challenges. The luxury hotel market in China has struggled with over-supply as mid-level hotels have caught on with middle-class Chinese and business travelers. Further hurting the luxury hotel sector is China’s anti-extravagance campaign, which has led some hotels to downgrade from five-star to four-star in an attempt to stay off the government’s blacklist. Another challenge is the rise of services such as Tujia, which launched two years ago and allows private renters to post short-term luxury travel accommodations.

image credit: accor

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