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Upbeat over business despite slump

CHINA'S hotel industry officials remain upbeat about their prospects despite a global recession that is weighing on the national economic growth rate and on the tourism trade.

They are pinning their hopes on an expanded network of airports across the country, growth in domestic travel, increased convention business and next year's World Expo in Shanghai.

"We've been hearing bad news from time to time over the past few months that hotels are suffering from cuts in room rates and falling occupancies, particularly in major cities such as Shanghai and Beijing," Zhao Huanyang, chief knowledge management expert at Hotelsolution Consulting Co, told an industry forum held last week in Shanghai. "However, I believe all the difficulties we have at the moment should be temporary and the long-term prospects of the industry still remain promising.''

Upmarket hotels catering to business travelers and more wealthy tourists are feeling the brunt of the economic downturn.

"Reduced trips and tighter budgets by business and leisure travelers from both home and abroad have slashed the average occupancy rate at the city's star-rated hotels to 55 percent in 2008 and that's dropped to about 37 percent at present, the lowest since 2000," said Huang Chenggang, secretary-general of the Shanghai Municipal Tourism Administration.

Meanwhile, the average daily rate fell to 538 yuan (US$78) from 658 yuan in 2008, the first drop in eight years, he said.

At the top end, the situation is even more dire as a recent survey conducted by the China Tourist Hotels Association and Hotelsolution Consulting Co Ltd found the average occupancy rate at the country's five-star hotels plunged by 12 percentage points year on year between September 2008 and January 2009, against a drop of 7 points at four-star hotels and 3 points at three-star accommodations.

The average daily rate at five-star hotels fell to 767 yuan, while the rate at four-star and three-star hotels were little changed at 410 yuan and 241 yuan.

Shot in the arm

The hotel industry is eagerly anticipating the World Expo to be held in Shanghai between May and October next year, seeing it as a shot in the arm to boost sales.

The event is expected to attract more than 70 million visitors to the city, including about 5.5 million from overseas. About 630,000 hotel beds will be needed to accommodate as many as 700,000 people a day during some peak days.

The six-month event, which is expected to be a big draw for domestic tourists, is also expected to benefit other Chinese provinces, with Jiangsu, Zhejiang, Anhui, Fujian, Jiangxi and Shandong benefiting most, Hotelsolution Consulting said.

The domestic market is being viewed positively by hoteliers.

"We've seen opportunities in an extended network of airports across the country, and rapid rise in domestic travelers," said Qian Jin, senior vice president for China operations at Starwood Hotels and Resorts.

More airports

The General Administration of Civil Aviation of China said earlier on its Website that the country will have 192 airports by 2010 and 244 by 2020, up from 147 at the end of 2006.

Starwood, which now runs 47 hotels across the country with another 64 in the pipeline, said it plans to open 15 new hotels in 13 Chinese cities this year alone.

Across the country, the proportion of domestic travelers at Starwood has already soared to 58 percent of the total, versus 42 percent before the global financial turmoil started to cool the hospitality industry, Qian said.

The convention business is a growing industry for hoteliers. More than 4,000 meetings and exhibitions are held in China every year. In Shanghai alone, more than 1,000 international conferences and over 500 large exhibitions are expected to be held in 2010, according to Hotelsolution Consulting's Zhao.

Starwood is not alone in being bullish. Paris-based Accor unveiled its MGallery label in China with the opening of the 75-room Songtsam Retreat at Shangri-la in Yunnan Province, the latest addition to the company's China portfolio.

Europe's largest hotel group said earlier it will more than double its presence in China in the next three years, focusing largely on middle-income travelers in second and third-tier cities.

Budget hoteliers are even more upbeat.

David Sun, chief executive officer of Nasdaq-listed Home Inns & Hotels Management Inc, operator of China's largest budget hotel chain, said the company plans to expand its stable of inns to 1,000 in the next three years.

Established in 2003, the company now operates 520 hotels in about 100 cities across the country.

The company also launched its first H Hotel in Shanghai, a brand which mainly targets mid to high-end Chinese business travelers.

The new upmarket brand, positioned between three-star and four-stars hotels, will be expanded to more gateway cities, including Beijing, the company said.



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