Domestic demand to drive Greater China’s hotel market development

Mainland tourists grew 3.8% YoY in the 1H.

The hotel market in China is set to continue growing and to benefit from a strong upsurge in domestic tourism in the medium to long term, with the domestic economy becoming increasingly driven by domestic demand, said Knight Frank.

In the first half of 2016 (H1 2016), the number of international visitors to the Mainland grew 3.8% year on year (YoY), while overnight international visitors increased 4.3% YoY, mainly as a result of efforts by the Chinese government in recent years to modernise transport infrastructure and upgrade tourist sites.

Encouraged by the growing number of tourists, international hotel operators have continued to increase their foothold in China.

Among the six cities covered by Knight Frank, Macau led in terms of new supply in 2015, adding about 2,200 five-star hotel rooms, followed by Guangzhou with over 1,300 and Beijing with over 1,000. Macau and Shanghai were the most active in H1 2016, adding over 900 rooms each.

By mid-2016, Beijing continued to have the largest stock of five-star hotel rooms among the six cities, with over 38,000, followed by Shanghai with over 28,000 and Macau with over 20,000.

In H1 2016, Guangzhou was the only city that recorded positive Average Daily Rate (ADR) growth among the six cities, gaining 2% YoY, mainly because of stable demand from the Canton Fair.

The other major cities saw downward pressure on the ADR of five-star hotels. Macau suffered from the largest decline in ADR, down 12.3%, because of abundant supply and intense competition, followed by Hong Kong where the ADR fell 5.3%, owing to fewer mainland visitors. The ADR in Shanghai, Taipei and Beijing dropped only 1-2%.

However, Knight Frank notes that Hong Kong’s ADR still remained the highest of the six cities, reaching US$277, followed by Macau at US$212 and Taipei at US$153.