THE Chinese hotel market’s performance has remained positive year-to-November 2011, with revenue per available room (RevPar) growing 2.8 per cent compared with the previous year, according to benchmarking agency STR Global.
Tracking more than 315,000 daily rooms across China and reporting on 22 cities, STR Global analysed the performance of the burgeoning secondary cities – cities with less than 10 million inhabitants. Most of the reviewed cities reported higher RevPar growth year to date (YTD) than the national average. China’s secondary cities, not including Beijing, Shanghai and Hong Kong, are of more strategic importance to hotel developers and operators as governmental policies are encouraging the development of export trade centres in technology and manufacturing in those provinces.
Limited new supply and strong demand growth boosted RevPar in the cities of Xiamen (+30.8 per cent), in south-east China, and in Chengdu (+20.3 per cent), located in south-west China, both of which are considered important financial and economic centres. Wuhan, located in the central province of Hubei and known for its car and steel manufacturers, experienced a shortfall in occupancy (-4.1 per cent), whilst ADR grew 18.2 per cent contributing to RevPar growth (+13.4 per cent). Destinations with a more balanced mix of visitors such as Hangzhou, a Unesco world heritage city, saw occupancy decline eight per cent YTD compared to the previous year. The decline was the result of additional room supply (+5.6 per cent) and increased ADR (+10.4 per cent). Located only 45 minutes by train from Shanghai, Suzhou, also named the “Venice of the East” for its historical canals and temples, saw occupancy decrease by four per cent whilst ADR and room supply grew by two per cent and 5.5 per cent, respectively.
Hotel supply growth from city to city is supported by an expanding real estate market and a growing regional economy. The pipeline until 2014, shown in the graph above, indicates that supply growth will increase across all the secondary cities with Sanya (+50.1 per cent) and Xiamen (+25.9 per cent) leading the market growth. Suzhou (+11.3 per cent), Xian (+12.0 per cent) and Hangzhou (+9 per cent), despite experiencing lower growth, will remain buoyant with new hotel openings, as international brands venture farther away from larger hubs.
“Hotel development by international and regional hotel chains over recent years has focused more and more on secondary cities across China,” said Elizabeth Randall, managing director for STR Global. “This development reflects the growing importance of these markets as economic centres and demand generators for inbound and outbound visitors. In 10 out of 15 cities, demand grew at higher rates than supply; however, the right balance between supply and demand will be crucial to the future success of hotels in these markets.”