Strong regional growth in China: STR Global

The Chinese hotel market’s performance has remained positive year-to-November, with RevPAR growing 2.8% compared with the previous year, according to STR Global, the leading provider of market data to the hotel industry.  

Tracking more than 315,000 daily rooms across China and reporting on 22 cities, STR Global analyzed the performance of the burgeoning secondary cities — cities with less than 10 million inhabitants. Most of the reviewed cities reported higher RevPAR growth year-to-date than the national average. China’s secondary cities, not including Beijing, Shanghai and Hong Kong, are of more strategic importance to hotel developers and operators as governmental policies are encouraging the development of export trade centers in technology and manufacturing in those provinces.  

Limited new supply and strong demand growth boosted RevPAR in the cities of Xiamen by 30.8%, in southeast China, and in Chengdu by 20.3%, located in southwest China, both of which are considered important financial and economic centers. Wuhan, located in the central province of Hubei and known for its car and steel manufacturers, experienced a shortfall in occupancy with a 4.1% decline, while ADR grew 18.2% contributing to RevPAR growth of 13.4%. Destinations with a more balanced mix of visitors such as Hangzhou, a UNESCO world heritage city, saw occupancy decline 8% year-to-date compared to the previous year. The decline was the result of additional room supply of 5.6 and increased ADR of 10.4%. Located only 45 minutes by train from Shanghai, Suzhou, also named the “Venice of the East” for its historical canals and temples, saw occupancy decrease by 4% while ADR and room supply grew by 2% and 5.5%, respectively.

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An expanding real estate market and a growing regional economy is supporting city-to-city hotel supply growth. The pipeline until 2014, shown in the graph above, indicates that supply growth will increase across all the secondary cities with Sanya at 50.1% and Xiamen at 25.9%, leading the market growth. Suzhou (11.3%), Xian (12%) and Hangzhou (9%), despite experiencing lower growth, will remain buoyant with new hotel openings, as international brands venture farther away from larger hubs.

“Hotel development by international and regional hotel chains over recent years has focused more and more on secondary cities across China”, said Elizabeth Randall, managing director for STR Global. “This development reflects the growing importance of these markets as economic centers and demand generators for inbound and outbound visitors. In 10 out of 15 cities, demand grew at higher rates than supply; however, the right balance between supply and demand will be crucial to the future success of hotels in these markets.”