Major projects to buoy Shanghai’s hotel market
Print Edition
WITH the completion of major tourism projects such as the Shanghai Disneyland in 2015, Shanghai’s hotel market is expected to remain healthy and continue to attract an increasing number of visitors and business travelers.
According to the China Hotel Report 2013, conducted by Knight Frank Research among five major cities including Beijing, Shanghai, Guangzhou, Hong Kong and Macau, Shanghai had the second largest five-star hotel stock with 25,619 rooms in the first half of 2013, following Beijing with 33,940.
Influenced by the weak global economy in 2012, Shanghai’s average daily rate (ADR) for five-star hotels dipped 8 percent to only 956 yuan (US$156) that year. However, by the first half of 2013, it slightly rebounded to 969 yuan.
The market is expected to be buoyant. The Disneyland project is set to attract an influx of new hotel establishments given the blueprint that has the Pudong New Area being developed into a key tourism region within five years.
The competition, in fact, has already begun. Grand Kempinski Hotel, Ritz-Carlton and Four Seasons have all opened in the Lujiazui Financial Zone to grab a slice of the pie. Mandarin Oriental Hotel Pudong, Shanghai opened in the second quarter of 2013 with over 300 rooms.
The development of three- and four-star hotels will also be mushrooming to meet the demand from more business travelers and tourists.
“Shanghai is currently seeing many ongoing improvements and is aiming to establish itself as a business community, trading platform, low carbon implementation zone and urban mixed-use development,” said Cinn Tan, senior vice president for marketing and sales, Jin Jiang International Hotels.
Top business travel market
The Global Business Travel Association (GBTA) predicts that China will become the world’s top business travel market by 2016. Shanghai as one of the country’s biggest cities is sure to grow as a popular tourism destination.
“In terms of Jin Jiang, we continuously work on focusing on the development and improvement of our growing MICE business. Most of our hotels in Shanghai are capable of hosting large MICE events with well-designed facilities featuring high-end amenities, and provide one-stop services to meet our business travelers’ various requirements,” Tan said. “In addition, Jin Jiang already has valuable knowledge about Chinese travelers and is very familiar with the domestic market as the largest percentage of our visitors is from China’s mainland.”
According to the Knight Frank report, 17 five-star hotels were added to the city’s market in 2011-2012. By the end of 2012, five-star hotel rooms in Shanghai reached 25,239, up 36 percent from 2010. However, the large increase in supply and slow global economic recovery led to the decrease of five-star hotel ADR in 2012, down 8 percent.
But the ADR of five-star international-brand hotels reached over 1,300 yuan in the first half of 2013, about 34 percent higher than that of the whole five-star hotel market.
The average occupancy rate remained at 59.1 percent in 2012. It dropped slightly to 57.2 percent in the first half of 2013.
“While China’s hotel market has seen some straining signals, particularly in first-tier cities’ luxury segment, burgeoning domestic demand should improve longer-term operations in a country with demographic advantages,” said Thomas Lam, director, head of Research & Consultancy, China, for Knight Frank. “International operators have already cast their votes of confidence with aggressive expansion plans, particularly in second- and third-tier cities.”
Charles Lai, vice president of sales and marketing of Kempinski China, echoes Lam.
“Infrastructure of transportation able to support a larger scale of group movement for morning departure/afternoon arrival, less hotel overall cost and local living cost than in first-tier cities, and more MICE groups looking for Thursday-to-Saturday patterns are the main reasons for this marketing shift,” he said. “In addition, pharmacy and fast moving consumer goods and retail corporations (multilevel marketing) are targeting more and more second- and third-tier cities’ markets.”
For example, the Kempinski Hotel Haitang Bay in Sanya, Hainan Province, is a strong force in the market. Its 1,500-square-meter Grand Vienna Ballroom can seat 1,400 people in theater-styled seating. Options for 14 alternative venues are also available including the 4,000sqm seaside green lawn and centuries-old Wood Art Museum for private dinner events. “Presences of brand in secondary cities also support marketing to drive local clients to gateway cities, customize packages and make it more attractive on second- and third-tier properties,” he added.
At the same time, Shanghai is still one of the most important markets, which no one would give up. Fourteen new luxury hotels will be open soon. The number of tourist receptions in Pudong is going to reach 45.2 million and the total tourism revenue will hit 52.3 billion yuan by 2015. By 2020, these two numbers are expected to soar, respectively, to 103.8 million and 105.2 billion yuan, the report said.
“Shanghai is a popular tourist destination in China and continues to attract a growing number of business travelers,” said Tan from Jin Jiang. “It will still be a key hospitality emerging market.”
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