Hotel companies and investors were likely to reduce investments in China in the coming years, despite the number of hotels currently under construction reaching a record high in the first quarter of 2022, because of the country’s Covid-19 measures, analysts said. In the January to March period, 3,711 hotel projects with 704,101 rooms, were under construction, up 8% and 7%, respectively, from a year ago, according to Lodging Econometrics’ latest report. This was despite the strict Covid-19 containment measures, such as routine lockdowns and strict quarantine requirements for international visitors, hobbling a full recovery in the tourism sector. “The first quarter of 2022 showed a record high construction of hotel rooms in China, but it is unlikely for this trend to continue, as some of the new projects were actually planned in pre-Covid-19 times,” said Tao Zhou, Managing Director of JLL Hotels and Hospitality in Greater China. “We are likely to see a slowdown in new developments for hotels over the next two to three years.”
Even in a market that is mainly supported by domestic demand – only 145 million were international arrivals compared with 6 billion local tourists in 2019 – hotels in China have seen revenues and occupancy decline during the pandemic. In the January to April period this year, hotel occupancy was 42.8%, lower than the 51.9% a year ago, according to hotel data-tracking firm STR. The average daily rate of hotel rooms was down 3.2% to CNY395, while revenue per available room fell by about a fifth to CNY169 in the same period.
Last month, U.S.-based Airbnb said it was pulling out of China, citing the challenges brought about by the pandemic. “China’s zero-Covid policy with stringent measures and travel restrictions has largely decreased business activities,” said Lucia Leung, Associate Director of Research and Consultancy in Greater China at Knight Frank. Besides deterring tourism, China’s lockdowns have also affected construction work, a fact that was mentioned by Marriott International in its first-quarter earnings call on May 4. Marriott’s current portfolio in China includes more than 450 hotels spanning 23 brands across more than 110 cities. The firm expects to open more properties under plans put in motion before the recent outbreaks of Covid-19.
“In 2022, we expect to grow our brand portfolio by adding another 13,000 rooms and more than 50 hotels in over 30 destinations, including popular gateway cities such as Chengdu, Xian, Sanya and Qinhuangdao,” said Henry Lee, Marriott’s President for Greater China. “In early 2023, we also expect to open our 500th hotel in China.” Hilton said China’s hotels market was expected to more than double to USD131.2 billion by 2027 from USD57.6 billion in 2020, giving the group, whose brands include Conrad and Waldorf Astoria, confidence about China, according to Alan Watts, Hilton’s President in the Asia-Pacific region. Hilton has over 400 hotels operating in China and opened 24 hotels in China in the first quarter this year, including the Conrad Shanghai, the biggest Conrad in the Asia-Pacific. Other planned openings also include the Waldorf Astoria in Shanghai Qiantan and Conrad Chongqing, the South China Morning Post reports.
