Trainee hotel staff in Shaanxi province. (Photo/Xinhua)
A saturated market is expected to put enormous pressure on China's hotel industry in the next 3-5 years, as 56% of new hotels in the Asia-Pacific region will be built in China during this time, according to a survey report published by London-based STR Global, the leading provider of market data to the hotel industry.
The report showed that the average occupancy rate of more than 50% of the hotels in 15 Chinese cities was 59.9%. This rate had suffered a yearly decrease, mainly attributable to a slowdown in Shanghai, Sanya, Xi'an, Chengdu and Guangzhou.
Despite the fall in occupancy rates caused by market saturation, investors had not stopped expanding in the market, STR Global said while publishing the report in the 5th Asian Hotel Seminar and International Hotel Investment Summit on Sept. 13.
The report estimated that 1,642 more hotels would be built in the Asia-Pacific region in the next 3-5 years, with 691 in China alone, accounting for 56% of the total. Most of these hotels would be at the higher end of the market. This meant that enormous capital will be injected into the market and the prices of hotels will remain high. However, occupancy rates would decline as the market became saturated, and investors would come under pressure from low profitability, predicted the report.
InterContinental Hotel Group announced a few days ago that since Sept. 1, the group would stop managing InterContinental Hotel in Shanghai Puxi. The hotel will no longer use the InterContinental Hotel and Holiday Inn brands. The hotel operator said that the group had unilaterally terminated its contract with the hotel, causing great economic losses to the hotel and affecting its operations.
At the summit, Hyatt Hotels & Resorts and Accor China agreed with the group's views. Xia Nong, vice president of real estate and development at Global Hyatt Corp, said certain luxury hotels were not suitable for the Chinese market. They had been established to boost the economy in local areas, leading to low occupancy rates and property prices. Further, high land prices and high construction costs had made it difficult for investors to make money from them.