Long-term prospects a draw for hotels in China

Skyline of Shanghai, China

Despite the massive injection of hotel rooms across many Chinese cities in recent years, China remains an attractive market for international hospitality companies looking to intensify their reach in this vast market.

Pan Pacific Hotels Group (PPHG), for instance, will debut Pan Pacific Beijing in 1H2017 while Amara Hotels & Resorts will launch the Amara Signature Shanghai early next year.

Acknowledging China’s saturated market, PPHG’s CEO Bernold Schroeder chalked up the current oversupply in some cities to the building boom during the lead-up to mega events such as the 2008 Beijing Olympics and the 2010 Shanghai World Expo.

“Today, there are 2.4 million hotel rooms in China, just half of that in the US. However, China’s population is four times larger than that of the US, and with robust growth projected in domestic and international travel, there is still room for expansion in the long run.”

He added: “As a company however, we are investing for the long-term. China is a huge, emerging market which at the same time is fragmented, with global hotel brands being relatively lesser-known. This presents an opportunity for smaller hotel groups such as PPHG to strengthen our brand presence in China.”

“Brand recognition” is also an important factor driving Mövenpick Hotels & Resorts’ development strategy in China, said Asia senior vice president Andrew Langdon.

As China is typically among the top five feeder markets for the group’s resorts in Asia, the presence of Mövenpick properties in tier-one Chinese cities will influence Chinese outbound travellers’ choice of stay abroad, he informed.

Amid slowing international arrivals and intense competition in China, Dawn Teo, director of strategic planning and corporate development of Amara Holdings, still sees China as “an attractive destination with great market potential”.

“While China’s (recent) growth story is muted, its GDP growth of over six per cent is still enviable compared to the rest of the world,” said Teo. “The total demand from both international and domestic travellers will outpace the current supply. We expect China to be among the fastest-growing hotel sectors.”

Meanwhile, the fierce competition in China’s first-tier cities has also led hotel groups to shift their expansion focus to secondary and tertiary cities.

InterContinental Hotels Group (IHG) has over 222 hotels in its China pipeline, of which more than 90 per cent will be located are in second-, third- and fourth-tier cities, according to Kent Sun, chief development officer, IHG Greater China.

He said: “These cities still have vast available areas for developing new hotel projects. Many local governments and developers are looking to build landmark structures to boost their (respective) city’s image and reputation which has provided good opportunities for us to expand our portfolio in China.”

China’s secondary and tertiary cities are also of “particular interest” to Hilton, Asia-Pacific president Martin Rinck told TTG Asia. “This is owing to the significant gap between existing hotel supply and the exponential increase in demand – particularly in popular leisure destinations such as Yunnan, Guangdong, Shaanxi and Sichuan,” he added.

Likewise, resort destinations in second- and third-tier cities are attractive to IHG. Said Sun: “Their booming prospects are backed by favourable government policies including more public holidays, annual leave encouragement and a boost in domestic consumption.”

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