Tourism and business travel: China's hotel industry back to pre-pandemic levels
The surge in demand is driving the rise in occupancy and room rates. Mid-range and top-tier hotels, which are among the most profitable, are experiencing further growth. The situation of the budget hotels, which suffered the highest losses during COVID-19, is also improving.
Beijing (AsiaNews) – After a three-year crisis, China's hotel industry has started to show signs of steady recovery in recent months, thanks to the post-pandemic boom in leisure travel and tourism, which is driving up demand and room rates.
According to JLL, a real estate services company, the nationwide occupancy rate reached 68.4 per cent in the first nine months of 2023, just 2 per cent lower than 2019 levels.
According to a report published on 19 October by STR, a hotel analytics provider, the occupancy rate reached a record high of 83.1 per cent on 2 October, during the eight-day "Golden Week" holiday.
Most growth comes from lower-tier cities, not large metropolitan areas, with a significant influx of Chinese tourists.
For Flora Zhu, director of China Corporate Research at Fitch Ratings, “The surge in occupancy was driven by the release of pent-up demand for leisure travel after the pandemic” that kept the country locked down for two years.
“There was,” she added, “also an uptick in business travel shortly after the Chinese New Year, but it gradually phased out due to a slowing economy, which also made companies cut their budgets for business trips.”
Meanwhile, JLL data show that the average daily rate (ADR), which measures revenue from occupied rooms, rose to 975.1 yuan (US$ 133.3) in the first nine months of 2023, up 6.4 per cent over 2019 levels.
The improvement in the occupancy rate and the average daily rate increased revenue per available room (RevPAR) of hotels across the country by 4.3 per cent, settling at 640.4 yuan in the first nine months, compared to 2019 levels. RevPAR is equal to ADR multiplied by occupancy rate.
The price surge is the result of an imbalance between supply and demand. In January 2023, Chinese hotels recorded a total of nearly 14.3 million rooms, a decline of nearly 20 per cent from 2020 levels, this according to data from the China Hotel Association.
Most of the hotels closed during this period were budget hotels, which were the hardest hit by pandemic-related closures.
When China lifted restrictions after scrapping its draconian "zero-Covid" policy of lockdowns and mass testing, pent-up travel demand was released and budget hotels saw a significant rise in prices.
Still, occupancy rates have not yet returned to pre-pandemic levels.
For their part, mid-range and top-tier hotel chains, thanks to their brand influence and economies of scale, held up during the lockdown phase, and their price increases were lower than those of budget hotels.
Mid-range and high-end hotel chains are the most profitable and their numbers have been steadily rising in recent years, with 26.3 and 9.2 per cent growth in December 2022 respectively, compared to 2019.
Despite the shift towards upmarket chains, China’s hotels are still quite affordable from an ADR perspective compared to other Asia-Pacific markets like Japan, South Korea and Singapore, which recorded 30 to 40 per cent increase between September 2019 and 2023.
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27/08/2020 13:08
24/03/2021 15:21
