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Expectations after the Expo

WITH millions of people visiting Shanghai for last year's global gala, hotels reaped massive rewards. But now the Expo extravaganza has left town, the hotel industry is preparing to adapt to a potentially barren period.

The six-month World Expo 2010 Shanghai attracted 73 million visits and brought China a huge profit of about 80 billion yuan (US$12.2 billion), which greatly benefited Shanghai's hospitality industry, the latest China Tourism Research reveals.

According to the research, more than 34.3 percent of the profit relates to hotel accommodation, a share of about 27.4 billion yuan.

The report also shows that the city's hotel room occupancy rate from May to September last year reached 80 percent, an increase of 30 percent from the same period the previous year. In addition, the daily room rate soared by more than 30 percent.

Budget and middle-level hotels gained bumper profits from the sudden increase of tourists from both home and abroad, while upmarket hotels obtained a bigger market share from their high-end corporate clients.

However, with the closing of this global gala, Shanghai's various hotels have been confronted with a common issue - how to keep the good momentum in the post-Expo period and laugh the last in this battle?

This year is definitely going to be a tough year for the city's hotels.

Experts suggest that hotels should control their room rate flexibly and try not to get stuck in the potential price war.

The capital Beijing learned the lesson after it held the 2008 Olympic Games.

In 2008, the total number of hotel rooms in Beijing increased by 103 percent from 2005 and the international sports event raised the room rate of five-star hotels in the city by 24.4 percent. However during the first half of 2009, the price dropped by 22.2 percent and the average occupancy rate fell to 47 percent. It went down to the lowest point during the past two decades.

It still remains to be seen whether Shanghai will follow Beijing's track record, as in the next few years hosts of leading hotels will emerge.

Statistics reveal that in 2009, the total number of international brand hotel guest rooms was increased by 5,278, reaching 32,045, while in 2004 Shanghai only had 13,922 hotel rooms.

It is estimated in 2011 that a total of 3,480 rooms will be added and another 4,899 next year. By the end of 2012 the total guest room number in Shanghai will hit 50,944, Jones Lang La Salle Hotel, a leading hotel investment services firm, told Oriental Outlook.

Supply will surpass demand. Prediction might cast some gloom over the city's hospitality industry. Some industry experts say this year, a two-digit drop in the room rate among most hotels would occur.

However, there is also a bright side. As air travel costs and room rates were raised greatly during the Expo, many exhibitions, events, business meetings and corporate annual conferences were postponed to 2011. The MICE (meetings, incentives, conferences and events) surge is going to start now until the end of this year.

"So far, the business trend is quite positive, actually higher than last year. The Expo has created significant influences in this metropolitan city and also brought international notice to this business hub in Asia," says Cetin Sekercioglu, vice president and general manager of Pudong Shangri-La, Shanghai.

With a total of 7,000 square meters of versatile indoor and outdoor event space, it boasts the largest hotel banquet and meeting venue in Shanghai. The Grand Collection comprises two pillar-less ballrooms, Grand Ballroom and China Hall, which can accommodate 1,500 and 1,700 persons respectively for cocktail receptions. An additional 10 meeting rooms of various sizes are available for social or formal events.

"Our cutting-edge services will attract high-end conferences and events to our hotel. We expect 2011 to be another good year," Sekercioglu says.

Michel Koopman, general manager of InterContinental Shanghai Expo, admits that the hotel is performing slightly below their expectations after the Expo as business levels in the city have dropped as a whole.

"But our MICE market has been picking up strongly," he says. "We have hosted prestigious medium to large events for the fashion and automobile industries."

Brands such as Dior, Ermenegildo Zegna, Wrangler & Lee, Miss Sixty, BMW, Mercedes-Benz, Rolls-Royce, Porsche and many others enjoyed their hospitality. The hotel also attracts a steady flow of guests from the Mercedes-Benz Arena, since it is so close to the show center.

InterContinental Shanghai Expo is also the official hotel for the FINA swimming championship in July together with the Expo Center which is only two minutes away by car.

"The unique selling point of our hotel is that we have a variety of MICE venues, all with a strong indoor-outdoor feeling, and great natural light and views," Koopman says.

The hotel's MICE facilities include an 800-square-meter Grand Ballroom and Terrace Ballroom with an outdoor area. Both ballrooms are equipped with state-of-the-art technology and have natural light with breakout areas. There are additional private villas with 12,000 square meters of garden and nine function rooms with spectacular river views and Expo Park views.

The St. Regis Shanghai is also well-positioned to take advantage of the increased MICE segment demand.

"The past two years have seen many new hotel openings and the pace continues in 2011," says General Manager Nick Porter. "The MICE market is definitely an area with growth potential for the city. I am very pleased that this is a key area of focus for the city government and tourism bureau."

The hotel has an intimate ballroom decorated and furnished in an elegant and classic style, many smaller breakout meeting rooms, and a team of event professionals whose aim is to ensure that every event exceeds the expectations of the organizer and delegates.

Wyndham Grand Plaza Royale Oriental Shanghai is also ready to grab its share of the MICE market.

"Despite additional hotel capacity, Shanghai continues to benefit from an improving reputation as a major MICE destination. We will continue to promote our large MICE capacity," says General Manager Brian Dechant.

The hotel boasts large MICE capacity - two grand ballrooms and 11 multifunction rooms with a total of more than 2,000 square meters and its superior room product, sizes ranging from 45 to 110 square meters.

With the mushrooming hotels in Shanghai, general managers look at it with a positive view.

"We are used to the competition, which is healthy. As more star hotels are opening in Shanghai, clients have more options and they will be more precise, more cautious when making the choice. Competition eventually will bring more international conferences and events to the city," says Sekercioglu from Pudong Shangri-La.


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