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How Will China's Hotel Market Fare in 2012?

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How Will China's Hotel Market Fare in 2012?

By - Monday 19 December 2011

There are signs that growth in the Chinese hotel market may be slowing down, largely as a result of reduced demand. Research published last month by STR Global showed that, during October, occupancy levels at Chinese establishments dropped by 2.4 per cent to stand at 65.8 per cent, compared to the same month in 2010. Although the average daily rate (ADR) increased by 1.3 per cent in this timeframe, the revenue per available room (RevPAR) generated decreased by 1.2 per cent.

Shanghai was highlighted in the report as one of the country's poor-performing markets, with its ADR, occupancy levels and RevPAR all falling in this period. In fact, the city posted the largest decline in RevPAR of any of the destinations surveyed, with the figures in this category sliding by 27.8 per cent in October. However, Beijing has fared much better, with the city's establishments recording an 18.2 per cent rise in RevPAR between October 2010 and the same month in 2011, the STR Global data showed.

Managing director of Soric International Mark Blick described the Chinese hotel market as being in "a cool-down period". "It is estimated that China may be oversupplied in the next three to five years, which may impact returns and the resulting investor confidence," he observed. Mr Blick pointed out many global hotel brands are rapidly expanding in the nation, with Marriott, Starwood and InterContinental Hotels Group among those targeting the country. He stated this increase of supply "is thought to have contributed to the slow growth of the Chinese hotel market". As a result of the large number of new rooms coming on to the market, Mr Blick predicted that it will take several years for the sector to stabilise.

Speaking to Bloomberg Businessweek last month, Jonas Ogren, of STR Global in Singapore, explained many hotel management groups are taking a "long-term view" of China and are intent on growing their portfolios in the country. "In the near term, it seems like demand doesn't have time to catch up," he commented. 

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