China Hotel Market Outlook

Transcription

Produced in conjunction with the China Tourist Hotel Association | Issue 4 2013
Hotels & Hospitality Group
China Hotel Market Outlook
At the end 2012, the new leaders of the Chinese
Communist Party were elected on the 18th Party
Congress held in Beijing. Since then, the leaders of
the 12th NPC (National People’s Congress) Standing
Committee were elected on the First Session of the
National People’s Congress. During this period, new
policies have been carried out during the leadership
transition. Faced with a new government structure
and political framework, China’s hotel industry has
been affected to some extent. Regardless, the tourism
industry is still an important foundation of the local
economy and a key driver of long term growth.
Last year, the total number of tourist visits reached
one billion globally, a record high. The Tourism
industry in China maintained strong growth,
especially for domestic travel, the largest component
of overall tourism growth in 2012. Outbound tourism
growth continued to gather pace, while inbound
showed an overall decline on the growth levels
observed in 2011.
Using some of the cities in China’s New Top 50
Cities Report as a reference, Jones Lang LaSalle
Hotels and Hospitality Group (JLL H&H) analysed
the supply and demand indicators for China’s hotel
market as part of The China Hotel Outlook 2012.
In addition, the analysis includes the wider Chinese
hotel market fundamentals, taking into consideration
the consumer market cycle, hotel asset management
and the development of tourism destinations.
Based on the identity and support of respondents to
this report over the past three years, China Tourism
Hotel Association (CTHA) and Jones Lang LaSalle
Hotels and Hospitality Group continued their
cooperation and conducted surveys to members of
CTHA. Seven additional cities and four new tourist
destinations were added to the list of 35 selected
cities in the 2012 report. Based on the results from
the surveys conducted in these cities and JLL H&H
internal databases were used for the research and
form the basis of our conclusions.
China Hotel Market Outlook 3
1. China Hotel Market – Survey Results
1.1 Survey Background
Amongst the surveys sent to hotels across China, 224 responses were
received, representing a total of 63,120 guestrooms. Of the hotels
polled, 37.4% were located in North China, 24.6% in East China,
20.1% in West China, 9.4% in South China and the remaining in
Central China (8.5%). The geographical distribution of this survey is
generally consistent with that of the 2012 questionnaire.
In terms of star rating, 42.0% were 5-star hotels, 33.5% were 4-star
hotels, 18.3% were 3-star hotels and the remaining 6.2% were hotels
of two-star rating or lower.
For hotel ownership, 41.4% of the properties were state-owned, 38.4%
were privately owned and 20.5% were held under other ownership
structures, such as joint ventures and foreign-owned enterprises.
With regards to the operational model, 52.7% of hotels were
owner-managed, 28.6% operated under a third party management
agreement, 6.7% franchised and 12.0% leased or operated under a
different model.
Figure 1. Opening Year of Surveyed Hotels
• Overall occupancy of surveyed hotels decreased from 61.8% in
2011 to 58.9% in 2012;
• In 2012, the ADR of sampled hotels was RMB 458, 2.5% above
that of 2011. However, the ADR was in line with the inflation rate of
China in 2012, which was recorded at 2.7% according to IHS Global
Insight. The respondents also indicated that consumers were more
price sensitive due to the uncertainties in the global economy;
• Due to a decline in occupancy and minimal ADR growth, Revenue
per Available Room (RevPAR) decreased 2.3% to RMB 270 in
2012. In 2011, occupancy witnessed a large decrease and ADR
saw a slight rise of 2.5%, which led to a RevPAR increase.
• According to respondents, hotel trading performance in 2013 is
likely to record a slight increase. The occupancy is expected to
rise to 60.9%. ADR is expected to reach RMB 471 by 2.9% and
RevPAR is likely to increase 6.3% to RMB 287. Data obtained from
this survey indicates some negative market sentiment in 2012. In
contrast, the positive outlook on hotel trading performance in 2013
indicates more confidence in the short term.
Figure 2. Hotel Performance (2011-2013*)
40%
30%
25%
20%
15%
10%
17.0%
10.7%
8.9%
20.1%
8.5%
700
70%
600
60%
500
50%
400
40%
300
30%
200
20%
100
10%
0
5%
0%
RMB (Yuan)
34.8%
35%
Before 1985 1986-1990 1991-1995 1996-2000 2001-2005 2006-Present
Source: CTHA 2013 survey results (total 224 hotels)
Of all the hotels sampled, just over 65% opened prior to 2005. New
hotels which commenced operations after 2010 account for 12.5%,
which increased slightly compared to that of last year’s surveyed
results.
1.2 Hotel Performance
In consideration of the below data, the survey results include the actual
performance for calendar years 2011 and 2012. In 2013, the results
are based on forecasts provided by respondents. After reviewing the
results, we note that the general performance for hotels across China
has decreased during 2012, as compared to the previous year.
2011
ADR
2012
RevPar
2013*
0%
Occupancy
*Estimates provided at the end of 2012
Note: ADR does not include breakfast or service charge; data for 2011 does
not include that for hotels opening in 2012
Source: CTHA survey results (total 224 hotels)
According to the following map and tables which depict the overall
hotel performance from the surveyed results, all five regions in China
showed a decrease in occupancy during 2012. The regions are shown
clockwise commencing with the largest regional decline across the
performance variables measured. The order is Central China, North
China, East China, South China and West China. The results reflect
the negative impact of several factors such as the global economic
weakness and political unrest in certain areas.
4 Jones Lang LaSalle
In terms of ADR performance recorded in 2012 as compared to
2011, only West China, Central China and North China performed
above the average (2.9%), achieving increases of 9.0%, 5.8% and
2.9% respectively. Especially for West China, the large influx of new
international hotel brands entering this market since 2010 is providing
growing impetus to the ADR level in West China. In spite of the large
percentage growth, ADR for surveyed hotels in West China was RMB
382.6, ranking last among all five regions.
For West China, surveyed hotels from Yunnan Province, Chongqing
Municipality and Sichuan Province made up 3.9%, 2.4% and 1.9%
respectively of the region. The ADR achieved in North China was
recorded at RMB 452, ranking second regionally. Of the results for
North China, 40.0% of respondents were from Beijing, following by
Tianjin, Jilin and Heilongjiang. Although the overall ADR of Central
China was below the average, it showed an increase of 5.8% to RMB
449 as compared to 2011, ranking third in China.
Most of Central China’s surveyed hotels were from Fujian Province,
following by Henan and Shanxi Province. As for the ADR of East
China, a decrease to RMB 539 or 1.2% saw it ranked highest among
all regions in 2012. The survey results from Zhejiang Province
accounted for the largest component of the sample, followed by
Suzhou Province and Shanghai. In Southern China, ADR showed a
decline of 1.2% to RMB 441 in 2012, placing it the fourth in the region.
The results from South China were mainly from Guangdong Province,
following by Hainan and Guangxi Province.
As one of the key criteria to measure the average market performance
of hotels, RevPAR is affected by occupancy and ADR levels.
In 2012, RevPAR experienced a decline across all regions, except in
West China.
In Central and Northern China, ADR increased by 5.8% and 2.9%
respectively. Both regions showed an above average increase in
ADR. As a result, both regions’ RevPAR decreased by 1.3% and
3.2% respectively. ADR in East and South China recorded a decline
of 1.2%. Occupancy of East and South China decreased by 2.9% and
2.2% respectively, resulting in a RevPAR decline of 6.0% and 4.5%
respectively. Compared to 2011, the occupancy in West China saw a
marginal fall but ADR increased by 9.0%, resulting in RevPAR growth
of 7.6%.
A key observation is that the surveyed hotels still reported confidence
in the hotel market in 2013, which is further enhanced by the forecasts
for regional occupancy and ADR. Occupancies across all regions are
projected to increase slightly.
Overall average occupancy is estimated to rise by 2.0% in 2013. One
exception is ADR growth estimates for Central and East China, which
were relatively conservative at -1.2% and 1.4% respectively. ADR
across the remaining regions of North China, South China and West
China are projected to increase by 4.2%, 4.7% and 3.7% respectively.
On the whole, RevPAR for 2013 is estimated to have a steady growth
of 6.3%.
Map1. Surveyed Hotel Performances – Divided by Region (2011-2013*)
West China
2012
2011-12
2012-13*
North China
2012
2011-12
2012-13*
Occupancy
60.5%
-0.8ppt
3.3ppt
Occupancy
58.6%
-3.7ppt
1.7ppt
ADR
382.6
9.0%
3.7%
ADR
452.3
2.9%
4.2%
RevPAR
231.5
7.6%
9.4%
RevPAR
265.0
-3.2%
7.2%
North China
East China
Central China
South China
West China
Central
China
Occupancy
2012
2011-12
2012-13*
56.3%
-4.1ppt
1.4ppt
ADR
449.4
5.8%
253.1
-1.3%
RevPAR
North China
East China
Central China
East China
2012
2011-12
2012-13*
Occupancy
56.8%
-2.9ppt
1.7ppt
ADR
539.0
-1.2%
1.4%
RevPAR
306.3
-6.0%
4.4%
2012
2011-12
2012-13*
-1.2%
South
China
Occupancy
64.6%
-2.2ppt
0.9ppt
1.3%
ADR
441.4
-1.2%
4.7%
RevPAR
285.3
-4.5%
6.2%
South China
*Estimates provided at the Q1 2013
West China
Note:
• ADR (RMB) does not include breakfast and service charge
• Revenue of year 2011 does not include that from hotels opening in and after 2011
• Unbalanced regional data were caused by various sample sizes and star rating distribution. The report provides average values for each region
1.3 Business Mix
1.4 Revenue Mix
Among the surveyed hotels, corporate business travellers were still the
leading segment in the business mix, making up 62.0% and increasing
by 0.3 percentage points from 2011.
According to the survey results by revenue mix, there are no obvious
changes on proportion accounted by rooms, F&B and by others in
2012 compared to those in 2011. Room revenue made up almost
half (48.0%), which was larger than that from F&B and remained
the leading component in the revenue mix. We expect this trend
to continue in 2013. Room revenue percentage was estimated to
increase to 48.8%.
Figure 3. Business Mix (2011-2012)
Long-stay Guests
Figure 4. Revenue Mix (2011-2013*)
Leisure Group
Others
Leisure FIT
2013*
48.8%
22.2%
18.3%
10.7%
2012
48.0%
23.3%
17.6%
11.1%
2011
48.2%
22.8%
18.2%
10.8%
Corporate Group
Corporate FIT
0%
5%
2011
10%
15%
20%
25%
30%
35% 40%
2012
0%
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Rooms Revenue
F&B Revenue (Meeting and Banquent parts)
In terms of leisure demand, there was little or no change recorded in
the proportion of the individual leisure traveler segment as compared
to 2011. The proportion of group leisure travellers decreased by
0.4 percentage points. Increasing demand from the leisure traveler
segment has led to less price sensitivity. The results identified that
guests tend to choose higher quality hotels with personalised service.
Notes: Revenue from hotels opening in or after 2011were not included in
revenue mix calculation
In addition, private and quiet living environments and the presence
of local cultural activities are also preferred. In comparison, long-stay
guests and other segments increased slightly in 2012. The long-stay
segment accounted for 4.9%. Other segments accounted for 12.0%,
increasing by 0.4 percentage points.
The data provided via the surveyed results shows that F&B revenue
accounted for 40.9% of hotels’ general revenue, which is consistent
with the 41.0% recorded in 2011. This is also projected to remain
consistent in 2013. Conferences and exhibitions are usually the
F&B Revenue (Restaurant and Bar parts)
Other Revenue
main revenue source for F&B. However, it is projected that revenue
would decline marginally by 0.5 percentage points to 22.8% in 2013,
potentially affecting the total hotel revenue. Over the years 2011 and
2012, other revenue remained stable at approximately 11.0%.
This is projected to decrease slightly to 10.8% in 2013 according to
survey responses.
1.5 Market Outlook for 2013
1.4.1 Revenue Mix by Star Rating
When analyzing the revenue mix by star rating, we note that the higher
the rating of a hotel, the smaller the divergence between room and
F&B revenue. As shown in the following figure, there is likely to be no
significant changes in the estimated revenue mix from 2011 to 2013.
Room revenue of 4 or 5 star hotels is estimated to increase slowly in
2013.
Table 1: Occupancy Forecast (2013)
Figure 5. Revenue Mix (2011-2013*) - by Star Rating
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Operating Outlook
In the survey, we asked the hotels to share their outlook on occupancy,
ADR, operational cost and competitive pressure for 2013. The results
are shown in the following table:
2013
2012*
Increased
38.8%
47.8%
Unchanged
20.9%
37.8%
Decreased
38.3%
13.1%
Not Predicted
2.0%
1.2%
2013/2012
Forecast Change
--
Note: 2012* results from survey conducted in 2011
Source: CTHA 2013 survey results (Total 224 hotels)
With the decline in occupancy and RevPAR in 2012, the outlook
for 2013 is not as optimistic. However, 38.8% of surveyed hotels
anticipate an occupancy increase. We note that this is substantially
lower than the 47.8% of respondents recorded in the 2012 report.
Among the results, 56.6% predicted that the growth would be less
than 5.0%.
2011 2012 2013* 2011 2012 2013* 2011 2012 2013* 2011 2012 2013*
5-star
Rooms Revenue
4-star
3-star
2-star & others
F&B Revenue (Meeting and Banquent parts)
F&B Revenue (Restaurant and Bar parts)
Other Revenue
Notes: Revenue from hotels opening in or after 2011 were not included in
revenue mix calculation
A further 20.9% anticipate no changes, falling by 16.9% over last
year’s survey. Around 38% of respondents predicted that the ADR
would decrease, lower than the 13.1% in 2012. Among the results,
45.3% anticipated that occupancy would fall by over 5.0%.
Compared with the anticipation for the market in 2012, from the
2011 survey, hotel performance forecasts in 2013 were relatively
conservative compared to the results obtained last year. However,
more than half of the surveyed hotels held a positive view of the
overall market.
In some regions, a large number of guestrooms have been added to
the market, outpacing short-term market demand projections. This
has resulted in a noticeable level of oversupply. In order to improve
occupancy, hotels might reduce room rates to maintain market share,
which is likely to restrict growth in ADR.
Table 2: ADR Forecast (2013)
2013
2012*
Increased
37.8%
62.9%
Unchanged
35.7%
31.1%
Decreased
24.5%
4.8%
Not Predicted
2.0%
1.2%
2013/2012
Forecast Change
--
In response to 2013 ADR projections, 37.8% of surveyed hotels
anticipate an increase, which is lower as compared to 62.9% of
surveyed hotels which expected an increase in last year’s survey.
Amongst the surveyed hotels which expected an increase, 62.2%
believed that the growth would be less than 5.0%.
Surveyed hotels (35.7%) expect ADR to remain at the current level
while 24.5% forecast a decrease, substantially above the 4.8%
recorded in 2012. Amongst the sampled data, 66.7% anticipate the
decline to be less than 5.0%. As compared to the 2012 sampled data,
the anticipated growth in ADR was relatively conservative.
Table 3: Operating Cost (2013)
2013
2012*
Increased
64.8%
78.9%
Unchanged
17.9%
13.1%
Decreased
11.7%
3.6%
Not Predicted
5.6%
4.4%
2013/2012
Forecast Change
--
Moreover, operational costs are estimated to rise or remain stable
in 2013 by 82.6% of surveyed hotels. This is 9.3% lower than that in
the 2012 report. According to the surveyed responses with regards
to revenue mix, most hotels forecasted that room revenue would
increase while F&B revenue via conference and banquets would
decrease slightly.
Room operational costs account for a smaller proportion of a hotel’s
total revenue as compared to F&B operational costs. The indicative
change in revenue mix should be considered when forecasting
operational costs in 2013.
Table 4: Competitive Pressure (2013)
Increased
2013
2012*
89.0%
72.9%
Unchanged
5.5%
19.9%
Decreased
1.6%
7.2%
Not Predicted
3.9%
N/A
Table 5: Lodging Demand Drivers (2013)
2013/2012
Forecast Change
--
More than 94% of respondents indicated that a hotel’s competitive
market pressure would be higher or will remain unchanged in 2013.
The main reasons were increasing operational costs, growing capital
market values and existing hotels which have not been renovated
feature dated products and are unable to compete with newer hotels.
Approximately 1.6% of respondents anticipated the competitive
pressure in the marketplace to decrease. Other respondents indicated
that it depends on implementation of government policies.
Demand Drivers
An analysis of surveyed results on potential demand drivers shows
that large-scale conferences, events and exhibitions account for the
largest proportion of lodging demand (30.2%), maintaining the same
level as reported in 2012. Demand driven by major tourism project
developments / improvements increased by 4.2% to 24.2%.
Surveyed hotels regarded it as an important tourism demand
motivation. The number of respondents choosing “the expansion
of developing/ high-tech zones and increasing office supply” as the
demand driver shows a 3.2 percentage points higher than that of 2012.
According to statistical data, government generated demand recorded
a decline of 12.2 percentage points to 5.8% in 2012. From the latter
half of 2012, most surveyed hotels are undertaking a “wait-and-see”
approach on government demand, which is different from last
year’s response.
With the announcement of The National Eight-point Rule, governmentled travel demand is estimated to fall. Sales initiatives and efforts to
target other market segments and the expansion of sales distribution
channels are anticipated measures to make up for the shortfall in
government demand.
The construction and expansion of traffic hubs was a new factor
influencing guestroom demand motivation. The result shows that this
factor ranked in fourth with 15.0%. The result indicates the importance
of ease of accessibility on guestroom demand.
2013
2012*
Large scale meeting / activities / exhibitions
30.2%
30.0%
Major tourism project
developments / improvements
24.2%
20.0%
Expansion of development / high-tech zones
15.2%
12.0%
Development and expansion of transportation hub
15.0%
N/A
Increased office supply
9.7%
6.0%
Increased government demand
5.8%
18.0%
Future Challenges
Opinions on future challenges were also asked in the survey.
Responses were ranked with that in the China Hotel Market Outlook
2012. The results are as follows:
Table 6: Challenges to Future Operations
%
2013
Rankings
2012*
Rankings
Rising inflation,
increased operating costs
18.0%
1
1
Increased labor costs
17.6%
2
2
Pressure on occupancy due to
new hotel supply
15.3%
3
3
Economy / policy uncertainty
10.6%
4
7
Guests’ ADR sensitivity
10.0%
5
8
At the top of the list, increasing costs have become the focus of
attention, including increasing hotel operation and human resource
costs. In recent years, with the large influx of new hotels, recruiting
and training costs have been affected by higher employer turnover.
More competitive remuneration packages can be offered to attract
qualified employees.
Respondents noted that given the shortage of labour and increased
labour cost, measures such as reasonable arrangement of positions
should be considered to maximize work efficiency. An increase in staff
training would also be important to improve service quality and
product experience.
Additionally, the opening of new hotels has also contributed to
pressure on occupancy levels. Surveyed hotels in several cities
responded that new hotels caused wider customer dispersion and
increased price competition.
Moreover, the Eight-point Rule related to the improvement of working
practices and maintaining close contact with the Political Bureau of
the Central Committee, greatly cutting the budget of government,
which has an impact on the hotel industry. In last year’s survey, the
uncertainty of economic / political expectation ranked seventh. In
2013, this has risen to fourth position by respondents.
Most surveyed hotels expressed concern over the introduction
of new policies as this might affect their operational strategies.
Some respondents mentioned that since the government’s recent
announcements which encouraged necessary and work-related travel
only, hotels which were targeting meetings, incentives, conventions
and exhibitions (MICE) and F&B have been affected. Recent costcutting measures in public sector budgets and a general restriction on
travelling and conferences has resulted in a reduction of governmentrelated travel.
The increasing price sensitivity on guestroom rates has also brought
some challenges to hotels. As some respondents mentioned, the
economy of many western countries has not yet recovered. Several
larger companies were still cutting their travelling budgets switching to
video conferencing over flying delegates to conferences and meetings.
1.6 Market Outlook
With regards to the medium to long term outlook, 42.1% of
respondents held a neutral view. Optimistic respondents accounted for
26.3% whilst fewer than three per cent were either very pessimistic or
very optimistic.
Figure 6. Outlook (2014—2017)
Very
Optimistic
2.6%
Very
Pessimistic
2.6%
Optimistic
26.3%
Normal
42.2%
Pessimistic
26.3%
Table 7: Future Outlook Comparison
2013
2012*
Optimistic
28.9%
44.6%
Neutral
42.1%
41.8%
Pessimistic
28.9%
11.5%
Did not Predict
0.0%
2.0%
2013/2012*
Forecast Change
--
As compared to the 2011 survey results, the proportion of neutral
respondents rose by 0.3 percentage points to 42.1%. The proportion
of “pessimistic” and “very pessimistic” hotels recorded a significant
increase of 17.4 percentage points to 28.9%. However, the proportion
of “optimistic” and “very optimistic” hotel respondents declined by 15.7
percentage points to 28.9%.
Factors such as uncertainties surrounding the global and domestic
macro-economic environment, the introduction of The Eight-point Rule,
the significant increase in hotel supply, older and dated facilities and
equipment, the lack of human resources and overall concerns on service
quality have resulted in operational pressure on the surveyed hotels.
1.7 Conclusion of Survey
In summary, the results of the survey are as follows:
• The overall performance of all surveyed hotels in 2012 decreased
slightly. Future market conditions are estimated to improve
marginally over the course of 2013;
• In 2012, only the West China region recorded growth in RevPAR.
All other regions of the survey showed some decline to
varying degree;
• Currently, business travellers’ account for the highest overall
demand and this trend is set to continue. As for individual leisure
travel demand, this segment has increased for two consecutive
years whilst group leisurere travellers have decreased for two
consecutive years;
• Room and F&B revenue had a relatively equal share of total
revenue for four and five star hotels. Rooms revenue forms a major
part of three-star or lower rating hotels’ total revenue and F&B
revenue to a lesser extent;
• Operational costs continued to rise in 2012 as seen in 2011.
According to the results, increasing operational costs one of the
challenges faced by hotels;
• Based on factors such as the opaque forecast on economy and
policies, the results generally concluded that most hotels held
neutral views or remain more negative on the future of China’s
hotel market.
2. China Hotel Market – Supply and Demand Factors
2.1 Hotel Markets and Cities Development
With the continuation of China's economic reforms amidst an
uncertain global economy, the development of cities from different
tiers in China will be influenced by domestic demand and policies as
well as factors unique to the Chinese market. Under the impact of
macroeconomic policies and new opportunities for real estate markets,
we developed this report on the basis of cities in “China 50”, to provide
a better understanding of hotel market performance and investment
opportunities of cities from different tiers.
To illustrate the difference, we analyzed 42 cities from Tier 1, Tier 1.5,
Tier 2 and Tier 3 in detail. In addition, four other cities where tourism
is a core economic driver and strong hotel development levels have
been seen were added to this list. In this section, supply and demand
factors will be analyzed.
Table 8: 46 Hotel Markets
Tier I
Tier 1.5 & Tier II
Tier III
Other additional cities
Beijing
Tianjin
Wuhan
Changsha
Fuzhou
Kunming
Lijiang
Shanghai
Suzhou
Qingdao
Zhengzhou
Foshan
Taiyuan
Sanya
Guangzhou
Chongqing
Dalian
Dongguan
Harbin
Shijiazhuang
Huangshan
Shenzhen
Hangzhou
Nanjing
Jinan
Changchun
Guiyang
Lhasa
Wuxi
Ningbo
Xi’an
Changzhou
Xuzhou
Chengdu
Shenyang
Hefei
Wenzhou
Haikou
Xiamen
Guilin
Nanning
Zhuhai
Nanchang
Urumqi
Hohhot
Note: Ranking of Tier I,1.5, II, III cities are from China 50, Jones Lang LaSalle
Other Capital cities
Yinchuan
Figure 7. GDP (2002-2017*)
100,000
18%
90,000
16%
80,000
14%
12%
60,000
10%
50,000
8%
40,000
6%
30,000
4%
20,000
2%
10,000
0
Real Growth Rate (%)
GDP – RMB bn
70,000
2002
2003
2004
GDP - RMB bn
2005
2006
2007
2008
2009
2010
2011
2012
2013*
2014*
2015*
2016*
2017*
0%
Real Growth Rate (%)
Note: 2013* – 2017* IHS Global Insight Forecast
Source: China Statistics Bureau, IHS Global Insight
2.1.1 Hotel Demand Drivers
Hotel demand is generally affected by factors such as macroeconomic policy, economic development, industry components,
transportation infrastructure, development of commercial real estate
(especially offices and industrial parks) and tourism. These key actors
have impacted demand segment and hotel development.
The optimization of the overall industrial structure creates opportunities
for the development of service industries especially highly value-added
industries, such as research and design (R&D), design, information
technology planning, start-ups in arts and culture industries, etc.
Moreover, development of the economy requires support from
emerging service industries as R&D, marketing and consultancy.
2.1.2 Macro Market
Over the past 10 years, the growth of Gross Domestic Product (GDP)
in China has been well above the historical average. However, after
the global financial crisis in 2008, the local economy was adversely
affected which caused a slowdown in national growth rate. In addition,
the economic restructuring has also contributed to the slower growth.
The government is committed to city planning, policies and, programs
in support of the tertiary industries. Other factors which will affect the
development of tertiary industries in a city include climate, culture,
environment and geographic location. The introduction of a significant
number of major service projects and an increase in investments are a
strong impetus to service industries such as tourism, MICE as well as
finance and logistics industries
The GDP growth rate was 7.9% in 2012, falling below 8.0% for the
first time in a decade. This is indicative that the significant growth of
the Chinese economy was unsustainable and is likely to moderate
allowing for economic rationalization.
In 2012, 10.1% of annual GDP was contributed by the primary
industry, with the secondary and tertiary industries accounting for
45.3% and 44.6% respectively. As compared to 2011, the ratio of
tertiary industry production in 2012 has increased by 1.5%. The tertiary
industry contributes to nearly half of the annual GDP, and continues to
grow rapidly.
Support from the government on planning, policy and development will
create more opportunities for the promotion of the tertiary industries.
The tertiary industry is the major industry that adds accommodation
and dining demand to hotels. Both business travel frequency and
budget are higher for the tertiary industry, above those of the primary
and secondary industry. It brings greater demand of accommodation
and dining in hotels, especially the demand brought by frequent
business trips in finance sector.
Figure 8. 2012 Ratio of Tertiary Industry (%)
90%
25%
80%
20%
2012 Ratio of Tertiary Industry (%)
10%
60%
5%
50%
0%
40%
-5%
30%
-10%
20%
-15%
-20%
0%
-25%
Beijing
Haikou
Sanya
Guangzhou
Lhasa
Shanghai
Hohhot
Nanjing
Urumqi
Shenzhen
Jinan
Taiyuan
Guiyang
Dongguan
Xi'an
Xiamen
Hangzhou
Qingdao
Kunming
Chengdu
Nanning
Wuhan
Tianjin
Wenzhou
Fuzhou
Wuxi
Zhuhai
Changzhou
Huangshan
Ningbo
Dalian
Xuzhou
Yinchuan
Lijiang
Shijiazhuang
Changsha
Zhengzhou
Harbin
Hefei
Chongqing
Nanchang
Foshan
Guilin
10%
2012 Ratio of Tertiary Industry (%)
2011-2012 Annual Growth Rate (%)
Note: Data of Shenyang, Suzhou and Changchun are not published, so they did not include in the calculation
Source: China Statistics Bureau
The figure above illustrates that, excluding Tier 1 cities such as
Beijing, Shanghai, Guangzhou and Shenzhen, some of the cities from
central and western China has a higher proportion of companies in
the tertiary industry than that of developed coastal cities. For example,
the proportion of companies in the tertiary industry in Xi’an, Guiyang,
Taiyuan, Jinan, Hohhot and Urumqi are all above 50%. The rate of
development for some cities is also noteworthy, such as that of Tianjin,
Kunming, Xuzhou, Guiyang and Urumqi.
Amongst these cities, the rapid growth of the tertiary industry of
Tianjin can be attributed to the economy and the policies. These have
resulted in improvements in the quality and size of service industries
such as finance, logistics, culture/ creativity and MICE. Also this is the
reason for the development of the tertiary industry in some cities with
a stronger economic base.
With regards to western cities such as Urumqi, although the
fundamentals of the economy still lags behind cities from the eastern
coastal region, the western cities can focus on developing arts and
culture industries by leveraging on the abundant natural resources
located in the cities, unique geographic location and effective
policy support and experienced high-speed development in the
tertiary industry.
15%
70%
2.1.3 Tourism Market Development
In 2012, the global economy began a slow recovery in the face of
strong headwinds limiting growth as a result of the European sovereign
debt crisis. Inbound international visitor arrivals continued to decline in
China over 2012, more than that recorded in 2011.
In addition, China is showing slower growth and rising inflation is
resulting in cost cutting measures being employed in local companies
to limit unnecessary travel. This in turn will affect the development
of domestic tourism. However, in terms of domestic tourism growth,
Chinese residents are still driving local demand for travel on the back
of improvements in disposable income levels.
According to the China National Tourism Administration, domestic
visitation witnessed a steady upward trend, recording 3.1 billion
domestic visitors in 2012. In contrast international arrivals recorded a
decline which can be attributed to the global economic slowdown.
Domestic tourism revenue has increased by more than 14.5
percentage points. In addition, total visitors reached above eight
million for outbound tourism in 2012 (a growth rate of 15%). This is
reflective of the increased spending power of Chinese tourists.
Figure 9. China Visitor Arrivals (2003-2012)
30%
35
Number of Visitor Arrivals (mil)
20%
25
15%
20
10%
15
5%
10
0%
5
0
-5%
2003
2004
2005
2006
2007
2008
2009
Domestic Visitor Arrivals (mil)
Annual Change of Domestic Visitor Arrivals (%)
International Visitor Arrivals (mil)
Annual Change of International Visitor Arrivals (%)
Source: China National Tourism Administration
2010
2011
2012
-10%
Annual Change of International Visitor Arrivals (%)
25%
30
Table 9: Top 10 Cities with the highest International Visitor Arrivals
International
Arrivals (mil)
2012
International
Arrivals (mil)
Growth Rate
2012/2011
Shenzhen
12.1
Wuhan
30.2%
Shanghai
8.0
Chengdu
28.9%
Guangzhou
7.9
Nanchang
28.5%
Beijing
5.0
Changsha
26.0%
Zhuhai
4.4
Haikou
22.4%
Dongguan
4.1
Guiyang
22.4%
Hangzhou
3.3
Wenzhou
22.3%
Suzhou
3.2
Huangshan
22.0%
Tianjin
2.3
Xiamen
21.4%
Xiamen
2.3
Taiyuan
21.1%
Table 10 shows that the top ten cities with the highest domestic visitor
arrivals are concentrated in the eastern costal area where the tourism
market is developing rapidly and has rich tourism resources. The top
ten cities which have the high growth of domestic visitor arrivals from
2011 to 2012 are concentrated in Midwest China. It also indicates
an increase in the importance of economic development of Midwest
China and a rapid increase in tourism development.
Chengdu, Changsha and Wuhan are ranked in the top ten not only
in terms of the total domestic arrivals, but also in terms of the growth
rate of the domestic arrivals from 2011 to 2012 which indicates the
potential of further tourism development of Midwest China.
Note: Data of Shenyang, Suzhou and Changchun is not published, so they are
excluded in the above table; International arrivals of Shenzhen include Hong
Kong’s international arrivals
Source: 2012 City Statistics Bulletin
2.1.4 Transportation Infrastructure Development
According to Section 2.0 of this report, transportation infrastructure is a
main driving factor of hotel demand. Good transportation infrastructure
can significantly increase the accessibility of tourist attractions, whilst
reducing the time and cost for tourists travelling to such destinations.
As a result, better transportation infrastructure encourages tourism.
Table 9 shows arrivals by volume and growth rate for the international
visitor’s market. Specifically, the top ten cities are all eastern coastal cities
which have strong economic fundamentals and potential for developing
more hotels and accommodation facilities. For example, Shenzhen is
in close proximity to Hong Kong and Macao and received the with the
highest international visitor arrivals in 2012 of the top ten cities.
Infrastructure improvements continue to maintain a steady momentum
throughout China. According to the China National Bureau of Statistics
and China Ministry of Transport, by the end of 2012, total national road
length is 4.2 million kilometres which is 131,000 kilometers longer than
that of 2011. More specifically, highway length increased by 11,000
kilometers in 2012, and the transportation capacity reached to 35.43
billion which increased by 7.8% from last year.
Conversely, the top ten cities which have the highest growth rate of
international arrivals from 2011 to 2012 are concentrated in Midwest
China, such as Wuhan and Chengdu which are two important
economic centers in central and west of China respectively. The
two cities occupied the former two places in terms of the growth of
international travellers.
Table 10: Top 10 Cities with the highest Domestic Visitor Arrivals
Domestic Arrivals
(mil)
2012
Domestic Arrivals
(mil)
Growth Rate
2012/2011
Shanghai
251
Suzhou
42.8%
Beijing
230
Lijiang
36.7%
Wuhan
141
Changsha
34.7%
Chengdu
122
Shijiazhuang
28.9%
Suzhou
111
Chengdu
26.6%
Tianjin
106
Urumqi
23.1%
Hangzhou
824
Taiyuan
21.2%
Changsha
799
Wuhan
20.9%
Nanjing
795
Guiyang
20.8%
Xi’an
786
Nanchang
20.3%
Note: Data of Shenyang, Suzhou and Changchun are not published,
are excluded in the above table
Source: 2012 City Statistics Bulletin
Visitors arriving by sea reached 260 million, whilst rail transportation
reached 1.89 billion which has an increase of 4.2%. High-speed rail
in China accounted for 9.35 kilometers and ranks first in the world for
the longest rail. Moreover, civil air transportation reached 320 million
which has a growth rate of 9.2%. In addition, more than half of the
cities observed a growth rate of airport throughput greater than 15%,
with Midwest China accounting for the majority.
Civilian car ownership was 59.6 million at the end of 2012 which
increased by 20.7%, and among this, the number of private cars is
53.1 million which increased by 22.8%. Due to the improvements of
high-speed rail, visitors are gradually changing their travel patterns.
For example, high-speed rail provides a more comfortable and
quicker way to commute, and this had led to more day trips instead of
overnight trips, decreasing the need for hotel accommodation.
In view of the improvement in roads and highways domestically and
the increase in private car ownership, self-drive trips have become
more popular and may stimulate greater short term travel. The abovementioned factors will enhance the development of new tourism
destinations, or day-trips, eventually bringing opportunities for the local
hotel market.
The below figure shows that most cities in the top ten of throughput
compound annual average growth (CAAG) capital cities are located
in Midwest China, (such as Shijiazhuang, Xuzhou, Hohhot, Yinchuan,
Tianjin, Sanya, Changzhou, Taiyuan, Zhengzhou and Nanning), which
matches with the fact that most cities in the top ten highest growth rate
180%
80,000
160%
70,000
140%
60,000
120%
50,000
100%
40,000
80%
30,000
60%
20,000
40%
10,000
20%
0
2012 Airport Throughput ('000)
2003-2013 Airport Throughput CAAG (%)
90,000
Beijing
Shanghai
Guangzhou
Chengdu
Shenzhen
Kunming
Xi'an
Chongqing
Hangzhou
Xiamen
Changsha
Nanjing
Wuhan
Urumqi
Dalian
Qingdao
Zhengzhou
Sanya
Shenyang
Haikou
Harbin
Guiyang
Tianjin
Fuzhou
Jinan
Nanning
Taiyuan
Nanchang
Changchun
Guilin
Wenzhou
Hohhot
Ningbo
Hefei
Shijiazhuang
Yinchuan
Wuxi
Lijiang
Zhuhai
Lhasa
Changzhou
Xuzhou
Huangshan
Foshan
2012 Airport Throughput ('000)
Figure 10. 2012 Airport Throughputs by Cities
0%
2003-2012 Airport Throughput CAAG (%)
Note: Suzhou and Dongguan do not have Civil Airport, and Foshan airport and Wuxi airport are suspended for years (resumed in 2009 and 2004 respectively)
Source: Civil Aviation Administration of China
of tourism arrivals are in Midwest China. This also reflects
a rapid growth in tourism and an increase in accommodation of
Midwest China.
2.1.5 Corporate Demand Drivers
Commercial real estate, especially office buildings and industrial parks
will also affect hotel demand. As shown in the survey results of 2013,
the development of office buildings and industrial parks reflects an
increase in corporate demand which will lead to more opportunities for
hotels to capture corporate demand.
China has become a more open market for foreign business, and the
domestic economy is still developing in a steady pace, so contact
between international and domestic businesses is resulting in more
corporate demand for hotels.
Development of Grade A office buildings and industrial parks indicates
the current situation and future expectations of corporate demand in
a city. This development can also bring corporate demand to hotels,
such as business travellers, incentive travellers, MICE travellers, and
even personnel associated with construction of new commercial real
estate projects. As a result, planning and development of Grade A
office buildings and industrial parks of a city is an important indicator
to analyze the city’s corporate demand profile.
Office Buildings
Corporate demand is a key driver of the hotel market segment, with
changes directly influencing the demand segment of the hotel market.
Companies located in the Grade A office buildings typically have
higher business travel and conference budgets, so hotels are keen to
target these companies. Therefore, supply and vacancy rates of Grade
A office buildings are good indicators of corporate demand within a city
and anticipated future corporate demand.
According to Jones Lang LaSalle Research data at the end of 2012,
the stock of Grade A office buildings in Tier 1 cities was far beyond the
rest of the group. Because of strong demand and greater new supply
of office buildings in Tier Ι cities, the vacancy rate did not record a
large increase. More specifically, the vacancy rate remained below
20%, with balanced supply-demand and healthy development cycle.
For some Tier 1.5 cities and Tier 2 cities, with the encouragement of
local economic policy and expectation of future business development,
the supply and demand of Grade A office buildings is projected to
remain robust. For instance, Ningbo and Wuhan are expected to see a
10 percentage points decrease in vacancy of Grade A office buildings
in 2014. For the rest of the surveyed cities, demand for Grade A office
buildings is expected to see supply outpace demand. As a result, the
vacancy rate is projected to increase. Vacancy rates of Grade A office
buildings in Chongqing, Shenyang and Changsha are forecasted to
record a 20 percentage point increase over the next two years.
Figure 11. Grade - A Office Supply (2012-2014)
75%
50%
25%
Vacancy Rate (%)
100%
A Office Supply ('0,000sqm.)
0%
1,000
800
600
400
200
2012 Existing Stock
2013 Existing Stock
Note: Wuxi 2012 existing supply is not published
Source: Jones Lang LaSalle
2014 Existing Stock
2012 Vacancy Rate
2013 Vacancy Rate
Changsha
Wuxi
Qingdao
Tianjin
Ningbo
Xiamen
Wuhan
Nanjing
Xi'an
Zhengzhou
Hangzhou
Suzhou
Dalian
Shenyang
Chongqing
Chengdu
Shenzhen
Guangzhou
Beijing
Shanghai
0
2014 Vacancy Rate
Industrial Parks
Driven by industry restructuring and revitalisation, industrial park
development growth continued in 2012. In general, industrial parks
act as an economic multiplier with growth and development of
headquarters of large scale corporates.
As one of the main supporting facilities, the quality and quantity of
hotels have been taken into account to benchmark for selecting
industrial parks. The feedback from the questionnaire this year
highlights that industrial park development is considered as one of the
major demand sources for hotel development.
In 2012, Jones Lang LaSalle’s Industrial Department completed
research of industrial park development which showed the capacity of
high-quality industrial projects (namely those industrial parks desired
by high-quality corporates) in Beijing, Shanghai and Guangzhou, prior
to other cities.
From the table below, it is observed that the development level of
industrial parks in Tier 1.5 is closely correlated to the level of Tier 1
cities. In particular, close attention should be paid to the potential of
cities from central and western regions. This is indicative that industrial
parks are being developed in mid-western regions.
On the other hand, there is a distance between newly built industrial
parks and traditional business districts where hotel industry
development is already well supplied and the hotel market is wellestablished. Developments located away from major activity centers
are therefore creating a requirement for additional hotel supply to
service local demand.
2.16 Growing Importance of the MICE Sector
The survey indicates that MICE events have continued to be a key
demand for hotel accommodation in the past three years. Large
conferences and MICE events generally lift occupancy levels and
delegates are also less price sensitive than leisure travellers. MICE
visitors also have a positive impact on the retail sector.
Table 11: 2012 High quality Industrial Park Supply
City
Supply
(’0,000 sqm.)
Beijing
650
Shanghai
550
Guangzhou
400
Shenzhen
350
Tianjin
350
Chengdu
340
Wuhan
250
Chongqing
160
Xi’an
110
Note: The criteria of high quality Industrial Park is different among each city
due to the different level of development status of each city
International Meetings
The latest data released by International Congress and Convention
Association (ICCA) shows that China hosted 302 international
meetings in 2011, having an increase compared with 282 meetings in
2010. China is one of the top ten international meeting destinations in
the world for two consecutive years.
According to the data, Beijing and Shanghai are the main international
MICE markets in China, capturing a market share of 60%. It is
also worth noting that with the improvements in infrastructure and
transportation options, some Midwest cities have gradually become
more popular international meeting destinations, offering unique
meeting facilities. Xi'an, Chengdu and Chongqing are amongst the
top 100 cities in the world for organized international events for two
consecutive years. Changsha is also on 2011’s list, holding five
international meetings in 2011.
Figure 12. 2011 International Conference Volumes
120
111
100
Number of Conference
80
72
60
40
20
15
15
10
0
Beijing
Shanghai
Mid-Western Cities
Xi'an
Hangzhou
Chengdu
Others
Source: International Congress and Conference Association
With improvements in infrastructure, greater meeting capacity and the
government's ongoing support, MICE demand in central and western
regions’ of China will gradually narrow the gap with the eastern and
other coastal areas in the future.
According to recent data, global international meetings are closely
linked with economic development. Since 2009, the total number
of international conferences globally has declined, from the annual
growth rate of more than 5% to nearly 1% growth for three consecutive
years. Additionally, there has been negative growth of 3% for the first
time in 2011.
However, a number of international meetings are being held at
developing countries due to lower costs. This provides opportunities
for China to host more meetings. Despite the decline in the number
of international meetings globally the number of meetings held in
China is increasing, which confirms that developing countries are still
in favor.
8
8
8
7
6
Tianjin
Shenzhen
Dalian
Chongqing
Nanjing
5
Changsha
As indicated in the 2011 China Meeting Statistical Analysis Report,
the meeting market is mainly divided into corporate meetings, public
service meetings, government meetings and social organization
meetings. As the main source of the meeting market, business
meetings still comprise more than half of the market. Factors such as
the reduction in number of agencies,, community organizations and
institution meetings, government agency meetings due to financial
constraints and policy implications.
In selecting suitable accommodation to hold conferences, business
hotels are often located in proximity to a conference center and
feature comprehensive meeting facilities, more reasonable division
of meeting’s functional areas, meet the basic needs of delegates,
therefore most popular.
Secondly, leisure resort hotels which rely on warmer months and
natural environments can target both tourists and meeting and
incentive travel. MICE visitors can hold meetings at the hotel and also
participate in recreational activities.
Resort destination or resort hotels have also become popular for
hosting events. A number of resort destinations in China are
popular meeting and exhibition travel destinations, in particular Lijiang
and Sanya.
16,000
20%
14,000
15%
12,000
10%
10,000
5%
8,000
0%
6,000
-5%
4,000
-10%
2,000
-15%
0
-20%
2003
2004
2005
2006
Number of International Conference Globally
Source: International Congress and Conference Association
2007
2011
Growth Rate (%)
2008
2009
2010
2011
Annual Growth Rate (%)
Number of International Conference Globally
Figure 13. Global International Volumes (2011-2013)
Figure 14. Conference Demand Distribution
Figure 15. Conference Venues Distribution
Association
Conference
9.3%
Others
3.2%
Resorts
16.1%
Government Agency
Conference
13.8%
Institution
Conference
22.8%
Corporate
Conference
54.0%
Source: 2011 China’s Conferences Statistic Report
Conference Hotel
80.7%
Source: 2011 China’s Conferences Statistic Report
2.1.7 More Leisure Travel
With regards to leisure travel, the key factors affecting this segment are T disposable income and discretionary time. In recent years, consumer
spending in China is much higher than the rest of the world, indicating that Chinese residents’ have potential for consumption.
20%
45,000
18%
40,000
16%
35,000
14%
30,000
12%
25,000
10%
20,000
8%
15,000
6%
10,000
4%
5,000
2%
0
0%
Average Dispensable Income (RMB)
Source: 2012 city statistical bulletin
50,000
Dongguan
Shenzhen
Shanghai
Guangzhou
Ningbo
Xiamen
Suzhou
Hangzhou
Beijing
Nanjing
Wuxi
Wenzhou
Foshan
Changzhou
Zhuhai
Qingdao
Changsha
Xi'an
Tianjin
Fuzhou
Hohhot
Dalian
Chengdu
Wuhan
Hefei
Kunming
Zhengzhou
Nanchang
Sanya
Shijiazhuang
Chongqing
Taiyuan
Harbin
Haikou
Guilin
Yinchuan
Guiyang
Xuzhou
Huangshan
Jinan
Lijiang
Urumqi
Average Dispensable Income (RMB)
Figure 16. City Average Disposable Income
According to urban residents' per capita consumption growth in
2012, most cities recorded growth of greater than 10%. Although the
absolute value of per capita consumption of the eastern and coastal
cities is still greater than that of the Midwest and inland cities, Midwest
cities’ growth rate is above 12%, and some urban cities recorded
growth of more than 14%. This is significantly higher than the eastern
coastal developed area cities. This indicates that Midwest cities still
have a large consumption potential which is a major driver of leisure
tourism development. On the other hand, it indicates that consumers in
the region will have a higher expectation of quality, variety and comfort
with regards to tourist attractions and accommodation.
is also increasing in the short term. Apart from Tier 1 cities and other
eastern coastal cities, many Tier 2 cities and Tier 3 cities in the
Midwest have also witnessed growing supply.
2.2.1 Existing Hotel Supply
Table 12: Top 10 Cities – New Supply
New Supply
CAAC
2012-2015
Cities
Cities
Existing
Stock*
YE 2012
New Supply
2012-2015
Xuzhou
83.8%
Shanghai
49,162
15,313
Zhuhai
48.1%
Sanya
15,310
6,964
This will encourage the region’s traditional tourist attractions to
upgrade to meet the growing demand for new tourism. China’s
consumer spending pattern continues on the growth trajectory which
is likely to lead to a greater demand for quality accommodation and
boosts the development of the hotels in the region.
Kunming
46.7%
Chengdu
11,071
5,339
Haikou
42.2%
Chongqing
10,591
4,730
Lhasa
40.9%
Guangzhou
10,364
4,065
Changsha
40.7%
Xi’an
10,531
3,713
Fuzhou
35.7%
Qingdao
8,924
3,596
2.2 Hotel Supply and Development
Nanchang
34.1%
Wuxi
5,969
3,443
As China's real estate’s development continues, in particular the
development of large urban complexes and tourist destinations,
internationally branded hotel supply complementing these projects
Tianjin
33.3%
Suzhou
9,610
3,252
Chengdu
31.9%
Hangzhou
8,477
3,232
Note: *Above data includes internationally-branded hotels only
Figure 17. China’s Current Guestroom Stock
Shanghai
Beijing
Sanya
Chengdu
Chongqing
Xi'an
Shenzhen
Guangzhou
Suzhou
Qingdao
Hangzhou
Shenyang
Tianjin
Wuhan
Xiamen
Wuxi
Dalian
Nanjing
Ningbo
Dongguan
Zhengzhou
Changsha
Foshan
Taiyuan
Changzhou
Guiyang
Jinan
Haikou
Kunming
Huangshan
Hohhot
Guilin
Nanning
Hefei
Urumqi
Wenzhou
Lijiang
Fuzhou
Shijiazhuang
Yinchuan
Harbin
Nanchang
Lhasa
Zhuhai
Changchun
Xuzhou
0
5,000
2009 Existing Stock
10,000
15,000
2009-2012 New Supply
20,000
25,000
30,000
Number of Guest Rooms
35,000
40,000
45,000
50,000
By 2012, the growth of new internationally branded hotels among the
46 studied markets increased by 12.6%, as compared to the slowdown
in 2011. The growth of new supply amongst Tier 1 cities remained at
5% except for Guangzhou which is more than 10%.
As Tier 1.5, Tier 2 and Tier 3 cities’ master planning is occurred at a
later stage, the growth of hotel supply in these cities has increased
substantially between 10% and 40%. Some markets showed a 70%
increase with Lhasa and Shijiazhuang showing increases above 40%
for two consecutive years.
Table 13: Room Stock by YE 2015
Cities
> 10,000
Shanghai, Beijing, Guangzhou, Tianjin, Chengdu,
Shenzhen, Sanya, Suzhou, Xi’an, Chongqing, Qingdao,
Hangzhou, Wuhan, Shenyang, Wuxi, Xiamen
7,001-10,000
Nanjing, Dalian, Ningbo, Zhengzhou, Kunming, Haikou,
Changsha
4,001-7,000
Foshan, Hefei, Changzhou, Dongguan, Guiyang, Jinan,
Taiyuan, Huangshan
2.2.2 Future Supply
According to forecasts in 2012, hotel room supply recorded a strong
increase. Suzhou, Xi’an, Chongqing, Qingdao, Hangzhou, Wuhan,
Shenyang, Wuxi, Xiamen will each have a hotel room supply of more
than 10,000 rooms by 2015, if all upcoming hotel additions materialize.
Kunming, Haikou and Changsha will feature approximately 7,000 and
10,000 rooms, while Jinan and Taiyuan will comprise between 4,000
and 7,000 rooms, if all projects materialize.
The top ten Chinese cities by total real estate investment in 2012
includes Suzhou, Xi’an, Guangzhou, Dalian, Wuhan, Hangzhou,
Chengdu, Shanghai, Chongqing and Beijing with investment totaling
more than USD120 billion. This is consistent with the cities which have
a large hotel room supply. As China's property development continues
to gather pace, especially in the Midwest cities and Tier 2 and Tier 3
cities, hotel supplies will continue to grow as an important component
of overall mixed use projects and large-scale urban developments.
Note: Cities in red are added in this year’s survey
140%
300
120%
250
100%
200
80%
150
60%
100
40%
50
20%
0
0%
2012 RDI (USD bn)
2011-2012 Annual Growth Rate(%)
Note: Data of Changchun, Shenyang, Nanning and Lhasa are not listed because of the lack of published results
Source: 2012 city statistical bulletin
350
Beijing
Chongqing
Shanghai
Chengdu
Hangzhou
Wuhan
Dalian
Guangzhou
Xi'an
Suzhou
Tianjin
Zhengzhou
Changsha
Nanjing
Wuxi
Qingdao
Fuzhou
Kunming
Hefei
Guiyang
Ningbo
Shijiazhuang
Harbin
Shenzhen
Wenzhou
Jinan
Foshan
Changzhou
Xiamen
Hohhot
Dongguan
Taiyuan
Nanchang
Xuzhou
Yinchuan
Zhuhai
Sanya
Urumqi
Guilin
Haikou
Huangshan
Lijiang
2012 RDI (USD bn)
Figure 18. 2012 Real Estate Investments
3. China Hotel Market Observations
3.1 Points of Focus in 2012
3.2 Breakthrough—Opportunity
After China entered a new development cycle in 2012, changes in
relation to overall market demand and operational pressure were
seen. Accommodation demand was further enhanced by the continued
growth of China’s tourism industry. Additionally, a more competitive
market has resulted in the debut of new international brands,
improving the overall experience for hotel guests.
Quality Improvement
Most surveyed hotels stated an improvement in quality of hotels
and market opportunities in light of an increase in competition from
the increasing supply and changing demand. Hotels typically use
measures such as facility optimization, sales strategy completion and
soft service improvement to handle new challenges.
The short-term supply and demand imbalance will bring some
operational pressure to hotels. However, this phenomenon will
gradually fade with the stability of demand market and stimulus
policies longer term. On the other hand, China’s level services,
room rate and management systems improved due to the entry of
international brands into the market.
Hotels, especially domestic brands, have made improvements
on various aspects, including interior design with themes, guest
experience, and detail-oriented customer service and room furniture
design and technology advancements.
In the survey for this year, respondents highlighted the
following points:
• The large volume of hotel supply that entered the market with
demand to come under pressure as a result of decreased inbound
international tourists, despite increased domestic tourism. What
measures should hotels take to respond to the supply-demand
imbalance?
• How to survive under an increasing cost and operational pressure
environment?
• How to deal with increased guests’ expectations and price
sensitivity on products and services.
Facing these changes and challenges, surveyed hoteliers still held
optimistic or unchanged views of the market. Some of the respondents
mentioned that they will handle the challenges by exploring new target
markets, expanding marketing distribution channels and by enforcing
internal management deal with the competition.
Although domestic hotel brands do not have a strong distribution
network or global marketing offices as compared to international
brands, they can differentiate their products through other with their
unique knowledge of the local markets. In recent years, domestic
brands not only pay more attention to the improvement of tangible
assets such as providing extensive facilities but also focusing on
providing good customer service.
Themes and design improvements are just one aspect of customer
service. The local expertise which domestic hotels have gathered over
the years is also advantageous and is transferring from extensive
management to scientific management practices. Local hotel brands
are also beginning to realize the importance of asset management.
Focus on Asset Management
In addition, faced with the intensified competition as a result of
increased operating costs, hotels have focused on controlling costs
and expenses. To maximize cash flows in the hotel, proper hotel asset
management of the hotel is critical. The purpose of asset management
is to monitor hotel operations, for service standards realization, to
supervise the conduction of management contracts, to oversee capital
expenditure, to maximize cash flow benefits and to maximize the
return of investment by increasing real estate values.
For this goal, owners usually need to have a long-term plan from
the commencement of the hotel development, in terms of feasibility
research, operator selection, management contract confirmation,
opening preparation, operation evaluation, performance scientific
analysis, plan updating and exit strategy.
Product Breakthrough
Due to the increase in customer expectation and price sensitivity,
many hotel management companies have launched new products in
order to increase market share, to overcome challenges, considering
the maximization of return of investment.
Some international hotel management companies have observed
the changes in China’s hotel market and have launched new
products suitable for the market. New products tend to emphasize on
guestrooms and have simpler, functional facilities. For example, a standard five-star hotel usually has a high room rate
with large public area and extensive facilities, but the utilization of
these facilities tends to be relatively low. In more competitive markets,
the return on investment is affected negatively.
As the core component of hotel revenue, guestrooms generate the
highest profit margins. This is particularly prevalent amongst business
customers; some often choose not to use any of the hotel amenities.
Many domestic brand hotels are focusing more on interior design to
differentiate their products from international brands. Furthermore,
different themes and designs could meet different guests’ perceptions
and be more adaptable to the local environment. For instance some
thematic hotels have combined local cultural characteristic which are
relatively popular among travelers. Some hotels are specially designed
for business customers in certain industries to meet certain
customer demands.
Chart 1: Hotel Asset Management – Continuing Value Creation Process
Step 1
Step 2
Step 3
Step 4
Develop new Hotel
or
Acquire Existing Hotel
Source / evaluate Operator
Negotiate HMA
Pre-opening budget
Performance Management
Exit Strategy
Asset disposal
Develop, Implement &
Monitor Strategy Plan
Oversight of Operator /
Physical Asset
Managing
the Investment Asset
Review Owner’s Objectives
Asset / Portfolio strategy
● Investment objectives
Budget Review / Approval
Owners expectations
● Set right benchmark
●
Manage Capital Deployment
● Physical Asset
● Efficient use of funds
● ROI measurement
Value Creation Opportunity
● Alternative uses of space
● Repositioning opportunities
●
Ongoing Value
Creation Process
Monitor Performance
● Review Meetings
● Asset Enhancements
Benchmark Performance
● Monitor hotel market
● Comparison to competitors
Management Agreement Compliance
3.3 Constant Attention
– Tourist Destination Developing
Besides factors such as national real estate policies and developers’
strong interests in hospitality real estate, the large growth of hotel
supply, the slow increase of inbound tourism and increased price
sensitivity on business travelling are considerations underpinning
demand for accommodation. Compared with improving cities’ industrial
offering and the increasing quality and quantity of enterprises,
developing tourist destinations and the improving leisure tourist
demand are all current motivations.
The definition of tourism and related accommodation assets has not
been as well defined. We summarized several factors defining a tourist
destination as follows:
• A real space that travellers stay for at least one day;
• The space includes complete tourist infrastructure, tourist
attractions and demand for one-day trip;
• There is real administrative boundaries for management
confirmation and unified image for the market competition;
• The destination includes multiple owners and usually have a
principle body to form a larger destination; and
• It could be of any size: a country, a region or island, a village, a
town or city, or a scenic spot.
These factors reflect the core influence of tourist resource as attractions.
Tourist resources are key factors to active the whole tourist system.
Additionally, tourist destinations are places to meet the demands of
travellers by service and facilities and a carrier of tourist reception.
Consequently, besides the attraction of tourist resources, the capability
of the tourist destination determines its general quality. Accordingly,
the planning and management of tourist destinations, especially for
reception facilities, became a key factor of the overall success.
In order to satisfy the sustainable development demand, both tourist
destinations with existing tourism resources and the ones required for
manufactured tourist resource are advised to consider the resource
integration and scientific planning for the six basic elements of
tourism - food, accommodation, transportation, travel, shopping and
entertainment. Following on, we will go through the development of two
tourism destinations and discuss the considerations and experiences
for a successful tourist destination during its development period.
Tourist destinations which could rely on existing tourist resource
Tourist destinations requiring manufactured tourist resource
Chart 2: Yalong Bay - Six Elements of Tourism
Chart 3: Changbaishan International Resort - Six Elements of Tourism
Dinning
Entertainment
Dinning
Accommodation
Shopping
Transportation
Entertainment
Accommodation
Shopping
Tourism Attraction
Transportation
Tourism Attraction
Case Analysis – Yalong Bay
Dining: In spite of the wide variety of seafood restaurants in Yalong
Bay, travellers could not enjoy their dining experiences as a result of
seasonal limitation, irregular market ordering and poor service from
restaurant owners.
Case Analysis – Changbaishan International Resort
Dining: Changbaishan has three main characteristics: Exotic food,
Dongbei cuisine and Korean cuisine. Exotic food is characterized by
rare ingredients such as ginseng, pilose antler, Chinese forest frog
and matsutake etc. Korean cuisine within Changbaishan can meet
domestic travellers’ demand without travelling to Korea.
Accommodation: As one of the tourist destinations that introduced
international hotel brands earliest in Sanya, Yalong Bay has about 20
resort hotels, most of which are international luxury brands over the
past decade.
Transportation: Yalong Bay is located 28 kilometers from Sanya,
Hainan Province. Similar to other non-city tourist destinations, a poor
public transportation system limits commuting for tourists. Moreover,
the current carrying capacity of Sanya Airport is failing to cope with
increasing travel demand. Slower construction and incomplete
infrastructure has put restrictions on the improvement of tourism levels
and on the influence on international tourist market.
Tourism Attraction: Yalong Bay lies on a tropical zone that is rare in
China. Its distinct tropical scenery is especially attractive to domestic
tourism. Furthermore, the launch of wellness-themed tourism
offerings and the increased reception ability for MICE tourists also
attracts tourists.
Shopping: The opening of duty free shops adds to Yalong Bay’s
shopping offering. However, Sanya and the whole Hainan Province
have followed. Lower industrial levels, irregular market orders and
incomplete infrastructure are factors limiting development. Revenue
generated by shopping is relatively low, accounting for 20% of
total revenue.
Entertainment: In Yalong Bay, there are many world class level
facilities such as Underwater World, Marine Sport Center, Golf
Court, and a Yacht Club for travellers to experience various water
entertainment activities. Since the 21st Century, Sanya has gained
popularity with the hosting of Miss World, Bicycle Island Round Travel,
Boao Forum for Asia and the construction of International Tourism
Island. Accordingly, the experience content provided to travellers
was enriched.
Accommodation: Currently, there are six star-rated hotels—Park Hyatt
Hotel, Westin Hotel, Grand Hyatt Hotel, Sheraton Hotel, Holiday Inn
and Holiday Suites—in Changbaishan International Resort, with about
2,000 guestrooms in total. In addition, the diversified accommodation
has satisfied different customer demands.
Transportation: Changbaishan Resort covers an area of 18.34
square kilometers, located beyond the Changbai Mountain Scenic
Sport of Baishan in Jilin Province. The resort is relative further away
from most areas of China. Currently, only five cities have direct flights
to Changbaishan, including Beijing, Changchun, Yanji, Shenyang and
Shanghai. Travellers typically have to transit in a one of the above
mentioned cities which greatly increases the time and travelling costs.
Tourism Attraction: Changbaishan International Resort is located in
the hinterland of Changbaishan and near the Heaven Pool West Slope
Scenic Spot. The peak of Changbaishan can be seen from the resort.
However, cold weather conditions in this area restricts the travel
period.
Shopping: There is one shopping street in Changbaishan International
Resort to date, but the availability of flights to the area is limited.
Besides, shopping in Heaven Pool of Changbaishan is relative limited
to souvenirs due to the absence of retail development. Commodities
like fern, shanghuang, agaric and shisandra are all rare and valuable
but not various enough.
Entertainment: A good skiing experience is available for travellers
with the natural resource and the manufactured large ski field in
Changbaishan International Tourist Resort. Besides the large ski field,
Birch Golf Club and hiking through the mountain also enhance the
experience but insufficient activities exist currently. Tiandi Changbai
is the only program performed in the Changbaishan Grand Theater.
Skiing is subject to weather conditions.
Several points can be summarized from the case studies above:
• The construction of transportation infrastructure can directly
influence the accessibility and sustainability of tourist destinations.
Convenient transportation increases the comfort of travelling and is
also critical in integrating all the facilities within the
tourist destination.
• Seasonality is one of the main issues. One of the solutions is to
increase tourist activities during the off-peak season. Currently, the
most commonly used measure is to introduce activities related to
the culture and characteristic of the destination. For example, hot
spring and spa are projects related to the wellness theme. Besides,
tourist festival activities could be held in conjunction with local
cultural resources. For instance, Yudeng Festival was developed by
Penglai National Tourist Resort in Shandong Province, according
to the Sea Sacrificial Ceremony. To ensure all-year round activities,
there needs to be efforts by the tourism board in macro planning
and technology support. Supporting policies from governments are
also critical success factors.
• In terms of shopping and entertainment, this is crucial to extending
the travel period and the maximising tourist revenue. Entertainment
projects suitable for travellers of all ages would attract visitors from
different age groups. Shopping and entertainment facilities are also
important tourist attractions, particularly during the off-peak season.
• Developing before detailed planning would affect the overall image
of tourist destinations and resources, which can be avoided. The
development of Jiuzhaigou is a typical case study. Even though
Jiuzhaigou is a protected area, the lack of detailed planning resulted
in the development of facilities which might not be suitable for
the tourist destination. . For instance, there is a surplus of middle
and low end hotels, an inadequate development of luxury hotels
and insufficient tourist supporting facilities resulting in a price war.
However, the construction of Changbaishan International Resort is
an important milestone in China’s tourism industry in this day
and age.
• Nowadays, domestic tourism is transferring to recreation from sightseeing gradually. Travelers pay more attention on the experience
in tourist destination and the general quality of the whole trip.
Besides the main tourist attractions and infrastructure, tourists are
also increasingly concerned about the supporting facilities and
infrastructure offered by the tourist destination.
In recent years, China's tourism market continued to develop and
tourism demand is increasingly diversifying and constantly improving
with the enhancements in tourist destinations. Traditional tourist
destinations, such as Huangshan, Jiuzhaigou, and Zhangjiajie have
a need to enhance the attractiveness of these destinations. The core
of these upgrades is developing new tourist attractions, expanding
and refurbishing tourism facilities. New tourism projects can meet the
higher demand with the support of related tourist infrastructure, which
can increase the attractiveness and affect the overall marketability of
the tourist destination.
The tourism market is gradually moving from sightseeing to more
focus on overall experience and comfort. Therefore, while recreational
projects and activities could be used to increase participation and to
extend the average length of stay, on the other hand, there is a need
to improve the tourist’s overall experience. Since hotels occupy at least
three of the “six elements of tourism”, these are key factors to enhance
travel experience and are important in retaining high-end customers.
Thus, some well-established tourist destinations which rely on tourism
resources such as natural resources or manmade resources need
to adapt to new market demands. New market demands can be met
through the development of upscale and luxury hotels to enhance the
image of the tourist destination.
In addition, influenced by policy and strategic adjustment of
developers, there are several emerging tourist destinations such
as Hangzhou Xixi National Wetland Park, Sanya Haitang Bay and
Jilin’s Changbaishan International Leisure Zone etc. These projects
have conducted pre-planning combining with the government
planning, analyzed needs from a market perspective to determine the
components of the development to ensure that it will be a sustainable
tourist development.
4. Summary
In the face of new challenges including slowing inbound tourism, the
impact of new domestic policies, the increasing number of hotel rooms
and rising operating costs, hotel respondents this year expressed
some concern across the results.
However, according to the results associated with demand motivation,
the eastern region has been affected by the impact of slower economic
growth and development. The central and western regions are
showing stronger momentum in development with new opportunities to
the development of China's hotel industry.
In addition, as more internationally-branded hotels continue to enter
China, hotel markets in most cities were impacted. This will enhance
the level of each region's hospitality offering and improve hotel
management at the same time, thus contributing to the overall quality
and development of China's hotel industry.
Domestic hotels are also paying more attention to themed hotels,
differentiation in asset management and creating hotel products that
meet the needs of different market segments to cope with increased
competition in response to new challenges. Improved operational
efficiency and maximization of the value of assets by planning and
management is also highlighted.
Finally, as developers and investors remain concerned about citybased hotels, they have set their sights on resort destinations at
the same time and especially the development of higher quality
destinations. The report analyzed integrating elements and
experiences to build a successful tourist destination via case studies,
as a special component of this report.
Contributors
Andreas Flaig
Managing Director, Advisory Asia
Jones Lang LaSalle Hotels & Hospitality Group, China
+86 21 6133 5549
[email protected]
Tina Jin
Senior Associate
+86 10 5922 1359
[email protected]
Monica Wang
Analyst
+86 28 6559 6222
[email protected]
ADR
Average Daily Rate
OCCOccupancy
RevPAR Revenue Per Available Room
GDP
Gross Domestic Product
Attachment: List of Provinces in each region
North China: Heilongjiang, Jilin, Liaoning, Tianjin, Hebei
East China: Shanghai, Jiangsu, Zhejiang, Shandong
Central China: Shanxi, Anhui, Jiangxi, Henan, Hubei, Hunan, Fujian
South China: Guangdong, Hainan, Guangxi
West China: Inner Mongolia, Chongqing, Sichuan, Guizhou, Yunnan,
Tibet, Shaanxi, Gansu, Qinghai, Ningxia, Xinjiang
Jones Lang LaSalle Hotels & Hospitality Group
Jones Lang LaSalle’s Hotels & Hospitality Group serves as the hospitality industry’s global leader in real estate services for luxury,
upscale, select service and budget hotels; timeshare and fractional ownership properties; convention centers; mixed-use developments
and other hospitality properties. The firm’s more than 265 dedicated hotel and hospitality experts partner with investors and owner/
operators around the globe to support and shape investment strategies that deliver maximum value throughout the entire lifecycle of an
asset. In the last five years, the team completed more transactions than any other hotels and hospitality real estate advisor in the world
totaling nearly US$25 billion, while also completing approximately 4,000 advisory and valuation assignments. The group’s hotels and
hospitality specialists provide independent and expert advice to clients, backed by industry-leading research.
For more news, videos and research from Jones Lang LaSalle’s Hotels & Hospitality Group, please visit: www.jll.com/hospitality
China Tourist Hotel Association (CTHA)
Established in February 1982, the CTHA is a national non-profit industry organization formed, in a voluntary manner, by the association
of tourist hotels, local hotels, hotel management companies, hotel equipment & supplies providers and other relevant organizations
in China as well as the hotel experts and senior scholars, under the operational guidance, supervision and management of the China
National Tourism Administration. The CTHA’s mission is to act in compliance with local law, protect its members’ legal rights and
interests and serve as a bridge between its members and the Government. Today, the CTHA counts 2,700 members, 333 directors, 115
standing directors and 25 vice presidents. Mr. Zhang Run Gang is the president of the Association. The CTHA serves its members by
strengthening communication amongst its members, collecting information on the domestic and international hotel market, providing hotel
training programs and forums and by liaising with overseas hotel & tourism organizations. In 1994, the CTHA joined the International
Hotel & Restaurant Association as one of its directors.
Disclaimer
This report is confidential to the recipient of the report. No reference to the report or any part of it may be published in any document,
statement or circular or in any communication with third parties without the prior written consent of Jones Lang LaSalle Hotels &
Hospitality Group, including specifically in relation to the form and context in which it will appear.
We stress that forecasting is a problematical exercise which at best should be regarded as an indicative assessment of possibilities
rather than absolute certainties. The process of making forward projections involves assumptions in respect of a considerable number
of variables which are acutely sensitive to changing conditions, variations in any one of which may significantly affect the outcome and
we draw your attention to this factor. Jones Lang LaSalle Hotels & Hospitality Group makes no representation, warranty, assurance or
guarantee with respect to any material with which this report may be issued and this report should not be taken as an endorsement of or
recommendation on any participation by any intending investor or any other party in any transaction whatsoever.
This report has been produced solely as a general guide and does not constitute advice. Users should not rely on this report and must
make their own enquiries to verify and satisfy themselves of all aspects of information set out in the report. We have used and relied
upon information from sources generally regarded as authoritative and reputable, but the information obtained from these sources may
not have been independently verified by Jones Lang LaSalle Hotels & Hospitality Group.
Whilst the material contained in the report has been prepared in good faith and with due care, no representation or warranty is made
in relation to the accuracy, currency, completeness, suitability or otherwise of the whole or any part of the report. Jones Lang LaSalle
Hotels & Hospitality Group, its officers, employees, subcontractors and agents shall not be liable (to the extent permitted by law) to any
person for any loss, liability, damage or expense (“liability”) arising directly or indirectly from or connected in any way with any use of or
reliance on this report. If any liability is established, notwithstanding this exclusion, it shall not exceed $1,000.
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be regarded solely as a general guide. Whilst care has been taken in its preparation no representation is made or responsibility accepted for the accuracy of the whole or any part. We stress that forecasting is a
problematical exercise which at best should be regarded as an indicative assessment of possibilities rather than absolute certainties. The process of making forward projections involves assumptions regarding
numerous variables which are acutely sensitive to changing conditions, variations in any one of which may significantly affect the outcome, and we draw your attention to this factor.

China Hotel Market Outlook

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