China Booming / Deloitte
2005 - Latest results from the China edition of the HotelBenchmark Survey
by Deloitte show that revenue per available room (revPAR) across China
increased by 18% to US$70 during the first quarter of 2005. This is not
surprising, as visitor arrivals to the country have been booming. According
to the China National Tourist office, international visitors increased
by 48% in 2004 to reach 17m. Strong economic growth, an increase in the
number of low-cost airlines and the relaxation of travel regulations have
also resulted in a surge in domestic travel across the country.
Two of China's key gateway cities that have benefited from this influx of visitors are Beijing and Shanghai. This growth is expected to continue as both cities prepare to host major events over the coming years, namely the 2008 Olympics and the World Expo 2010. This article looks at how hotels in Beijing and Shanghai have been performing recently and how each city is getting itself into shape to cope with anticipated future demand.
Beijing, the capital city of the People's Republic of China recorded strong growth in revPAR during the first quarter of 2005, up 23.3% compared to the same period in 2004. With an average room rate of US$85, the city is still performing some US$25 below the country-wide average for China. However, with the 2008 Olympics looming the city has scope to grow this further.
Beijing Capital International Airport saw 8.7m passengers pass through its terminals during the first quarter of 2005, up 18% compared to the same period in 2004. These figures are expected to increase further as travel restrictions continue to be relaxed. Previously, international visitors were only allowed to renew their visas twice, each for a period of three months. Now travellers can extend their visas for six to 12 months, as many times as they wish.
The Beijing Municipal Bureau of Tourism has also recently launched a European marketing initiative to attract visitors in the run up to and during the Olympics. In March 2005, an incentive scheme was introduced in the UK to offer travel packages, including flights and accommodation, to travel agents bringing more than 1,000 visitors to Beijing.
Seal of approval
The total number of athletes, journalists, spectators and tourists staying in the city during the Olympic Games is estimated at 800,000. Last year the Beijing Organising Committee for the Games of the XXIX Olympiad gave their official seal of approval to seven hotels in the city; Beijing Hotel, China World Hotel, Grand Hotel Beijing, Swissôtel Beijing, Beijing International Hotel, Kunlun Hotel and Beijing International Wuzhou Crown Hotel. In the run up to the Olympics, the committee will certify a further 70 star-rated hotels.
This is also the perfect opportunity for hotel companies to increase their presence in the city. In December 2004, Accor won the management contract to operate the Sofitel Wanda Beijing hotel in the new Wanda Plaza development in the city's central business district. The new 453-room Sofitel hotel is due to open in 2006.
Marriott is also planning to open two new Ritz-Carlton hotels in Beijing during 2006. The 256-room Ritz-Carlton Beijing Financial Street will be located in the city's financial district, while the 320-room Ritz-Carlton Beijing will be located on Changhan Avenue, close to Tiananmen Square.
First quarter hotel performance in Beijing
World Expo 2010
The Shanghai Municipal Tourism Administrative Commission reported a 26.3% growth in international visitors to the city for the first three months of 2005 compared to 2004, reaching 843,000.
Visitor numbers are expected to increase in the run up to the city hosting World Expo 2010. This global forum is the third largest event in the world after the Olympics and the World Cup and is expected to attract over 70m visitors. To cope with this increased demand, the government is already making plans to upgrade metro lines, buses and road links. Also as World Expo 2010 will be located on opposite banks of the Huang Pu River, a ferry service will also be provided to transport visitors between the two venues.
Get ready for take-off
Opened in 1999, Pudong's main runway has been operating at full capacity, handling almost 500 flights per day and 35m passengers per year. In March 2005, Shanghai Pudong Airport announced that its second runway is now ready for operation. As of 1 June 2005, British Airways will launch a new direct service between London Heathrow and Shanghai. This has been partly driven by the news that the British government plan to change travel visa rules to make it easier for Chinese citizens to visit the UK.
New kids on the block
Like Beijing, hotel supply in Shanghai is set to increase over the next few years. Not only to accommodate the rising number of international and domestic tourists arriving into the city, but also in preparation for World Expo 2010.
In January 2005, Raffles International Limited signed a deal with Jing An City Construction Fitting Development Company to manage a new 478-room hotel. This is scheduled to open in 2007. The Swissôtel Grand Shanghai marks the company's first hotel in the city.
Starwood Hotels & Resorts have also joined forces with the Shanghai You You Group to manage the Sheraton Shanghai Hotels & Residences in the Pudong district of the city. This new development will be part of a multi-purpose complex built alongside the new Shanghai World Exposition site, the venue for World Expo 2010. The hotel will be housed in one tower whilst the serviced apartments, offices and retail space in a further two towers. Scheduled to open in 2008, the hotel will have 509-rooms and 150 serviced apartments.
The outlook for both the Beijing and Shanghai hotel markets looks extremely positive as we embark on the second quarter of 2005. As both cities continue with their preparations for the 2008 Olympics and World Expo 2010 the number of tourists, both international and domestic is expected to rise. The relaxation of visa requirements and introduction of new airline routes across the country will also assist future growth. This will provide Beijing and Shanghai with the opportunity to further develop their hotel supply and drive further growth in average room rates.
Note: All analysis in US$
The HotelBenchmark Survey contains the largest independent source of hotel performance data outside of North America and tracks the performance of over 6,500 hotels and 1.2 million rooms every month.
|Also See:||Hotel Performance of Four Key Markets Where SARS Was Reported; Beijing, Hong Kong, Singapore and Taipei at End of First Quarter 2004 / May 2004|
|China Shines, with Promising Hotel Performance Results / Deloitte / October 2004|