Chinese Hotel Industry needs Olympic Boost

The Chinese hotel industry has experienced nationwide declines in RevPAR (room yield) through the first six months of 2008, according to STR Global's monthly survey of 528 internationally branded Chinese hotel properties. Several major markets have experienced occupancy declines as new hotel openings have stretched demand. With the world watching China for the 2008 Olympic Games in August, expectations are high for a strong second half performance.

Chinese national occupancy fell 6.9% in the first half of 2008 to 60.8%. Average daily rate increased 2.3% to CNY 936.23 (US$133.31). These metrics led to a 4.8-percent decline in revenue per available room.

"The Chinese hotel industry has thus far faced a year of significant challenges ranging from natural disaster to an uncertain global economy," said James Chappell, managing director of STR Global. "However, with the twenty ninth Olympiad in Beijing only a day away, the Chinese hotel industry will be looking to the event to provide the profits in 2008."

Locally, Chinese market performance is also down. In Beijing, new hotel openings and lighter than expected pre-Olympic demand have caused occupancy to drop 10.7% to 61.8%. However, a 7.6% boost in rates has helped offset this. Year-to-date ADR is CNY 964.48 (US$137.51) and RevPAR is down 3.9%.

In Shanghai, occupancy has also fallen by 8.5% to 59.1%. To compound this, rates have also fallen slightly, by 1.6%. Year-to-date ADR in Shanghai is CNY 1023.72 (US$145.91). Shanghai showed the poorest year-over-year RevPAR change among major Chinese cities, a 10% drop.

According to STR performance in Hong Kong was flat. Occupancy was down 0.8% at 80.6%, the highest in STR's Chinese survey. Rates increased 1.5% to reach CNY 1470.68 (US$209.27) also the highest. RevPAR increased marginally, by 0.7%.

The 12 May 2008 earthquake in Chengdu, Sichuan Province rattled the hotel industry there. Year-to-date, occupancy is down by 22.6% to 52%. Rates increased by a substantial 22.5% to cover the gap. Rates have reached 612.32 CNY (US$87.08) and RevPAR has decreased by 5.2%.

"Many of the new hotels in Northern China were developed specifically to meet the needs of the Olympics," added Mr. Chappell. "It will be interesting to see if Chinese markets can adapt to the new supply levels when the Games move on."

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