A lasting impression � over half of markets report double-digit growth

To help understand the improvement in hotel performance occurring throughout China we have compared hotel performance today to a time before the events of 9/11 and SARS sent a shock wave through Asia. Contrasting the cumulative performance of the 12 months to August 2004 with the same period ending August 2001 reveals that over half of the markets are today reporting double-digit growth in revenue per available room (revPAR). Much of this improvement being driven by average room rate growth.

The following chart displays the movement in occupancy and average room rate for the key regions and cities throughout the country. To put these results in perspective, data for all Asia Pacific and Europe is also included. Over 50% of the Chinese markets monitored are performing above the regional Asia Pacific total and every single Chinese market is out-performing the Europe average.

Across China there has been a marked variation in performance during this period. Of the six regions monitored only the Central China Region reported any loss of demand, whilst Liaoning Province was the only area to report a fall in average room rates. It was the performance of hotels in Shenyang that contributed to this decline as average room rate in the city fell 21%.
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Despite most of the attention on China�s tourism numbers being focused on overseas travellers, the growing domestic market screams with potential. The liberalisation of the airlines has created more travel opportunities within the country. In addition, a growing gross domestic product has led to a fall in the unemployment rate. As the middle class expands - with growing wallets, more free time and increased freedom to travel within the country - the dynamics of the tourism infrastructure will evolve.

The World Travel Organisation predicts China will become the number one global tourism destination by 2020. According to the China National Tourism Administration, business tourists currently account for 25% of all inbound arrivals; and this sector is anticipated to grow to support the expanding economy. The country is now competing head on with other global tourism destinations. The consumption of international and domestic business travel in China has reached US$24 billion - a level similar to that reported by France and Germany.

While business travel in China has made a major contribution to economic growth and globalization, the leisure sector is expected to expand due to growing domestic and international demand. Regional tourism offices across the country have recognised the need for cooperation with neighbouring provinces to maximise the appeal of China to visitors. By developing a unified image, the Chinese will be encouraged to explore their country while providing a foundation to capitalize on international interest.

Unleashing the potential of brand hungry travellers

It is estimated that only 10% of hotel supply in China is branded, which is relatively low considering China�s huge population. Most of this branded hotel supply sits within the first class and deluxe segment of the industry. Why? Well, until recently there has been limited demand for branded mid-market hotels. However as the number of domestic travellers increase the need for mid-market accommodation will grow. Accor has already responded to this trend earlier this year by opening the first Ibis hotel in Beijing. Two more hotels are planned to open during 2005.

The hotel companies have all taken different approaches as to where and how fast they expand in China. However what might prove to be more important than critical mass is brand recognition. With China forecast to be the largest outbound market by 2010 a number of hotel companies are hoping to become the brand of choice when the Chinese travel overseas. Market research indicates the Chinese population is extremely sophisticated and brand conscious, so developing recognised brands is an important consideration for any hotel chain wanting to reap the rewards of the surging number of outbound travellers.

With the implementation of �Chinese minimum standards� throughout their portfolio, Accor is an excellent example of a company addressing the importance of brand loyalty from Chinese guests. However, Accor is not alone in recognising the importance of China to its global portfolio. With nearly 50% of their business in China originating from domestic markets, and a high percentage of repeat guests, Shangri-La is investing heavily in China as part of their foundation for global expansion.

Asia Pacific�s shining star

China has been a major contributor to the overall improved economic performance in Asia, therefore establishing a strong presence in China is of the up most importance to global hotel companies. Accor, Shangri-La, InterContinental, Starwood, Marriott and Howard Johnson are among those who boast they will be increasing their presence in China over the coming years.

While there are still challenges facing the hotel industry in China, the performance of hotels to August this year provides a glowing report for progress to date. The volume of domestic travellers in China will continue to drive further growth, as will international visitors travelling to new destinations. Considering the size of the country, the large population, and the level of revPAR growth, it is no wonder that China is a shining star.

First again! HotelBenchmark launch China Survey

Leading the field in monitoring hotel performance in Asia Pacific, the China Survey is another first for Deloitte�s HotelBenchmark team. This is the first time that such comprehensive monthly rate and occupancy performance data on the Chinese market has ever been available. The new survey tracks 29 markets across the country � providing analysis by region, province, city, district and size of hotel.

The HotelBenchmark Survey is the leading provider of hotel performance data across Asia Pacific currently tracking 38 cities and 92 markets in the region. China is the 14th monthly performance survey to be launched under the HotelBenchmark banner. For further information please contact Mindi Green +44 (0) 20 7007 1235.