Knight Frank launches Greater China Hotel Report
Among all major cities, including Beijing, Shanghai, Shenzhen, and Hong Kong, the Average Daily Rate (ADR) of five-star hotels shrank, and the occupancy rate dropped in Shanghai, Shenzhen and Hong Kong. The weak growth trajectory of the hotel industry was further dragged down by the coronavirus (COVID-19) outbreak and this is expected to continue in the first half of 2020.
Hong Kong
Impacted by the social unrest since June, Hong Kong witnessed a significant drop in visitor arrivals. The occupancy rate of High Tariff A hotels fell 7 percentage points YoY to 74% in 2019, while the ADR dropped 8.0% YoY to HK$1,982.
Given months of social unrest, followed by the COVID-19 pandemic, the hotel market has faced mounting challenges. Many hotels have suffered under the pressure of weakened inbound tourism and the cancellation of major events. Lately, while some hotels may take the opportunity to accommodate people who are required to self-quarantine, other hotel operators are expected to temporarily suspend their businesses to reduce losses. The tourism industry landscape of the city has changed in the past few years, with more same-day visitors rather than overnight visitors. Going forward, more hotel owners are expected to redevelop their hotels into commercial properties or co-living spaces.
Macau
Macau had a record 39.4 million visitor arrivals in 2019, up 10.1% YoY, attributable in large part to improved connectivity with other Mainland Chinese cities via the Hong Kong–Zhuhai–Macau Bridge. Nonetheless, despite the double-digit jump in visitor arrivals, its five-star hotel market was clouded with a range of macro-economic and social factors that impacted growth. The hotel industry saw weaker performance in 2019 than in 2018, with the cumulative five-star hotel occupancy rate dropping 0.9% YoY to 92.3% in 2019.
The COVID-19 pandemic is threatening to impact the short to medium-term recovery of Macau’s hotel industry. As the virus has been declared a pandemic, it has led to a sharp decline in visitor arrivals, resulting in a contraction of the tourism, gaming as well as MICE industries. Nevertheless, in the longer term, Macau’s hotel sector will be bolstered with improved infrastructure, such as the Macau Light Rail Transit System.
Beijing
The number of tourist arrivals declined, and demand for tourism accommodation weakened in 2019. The weak global economy, keen competition and huge amount of new supply have exerted heavy pressure on the local hotel market. In 2019, nine new luxury hotels opened in Beijing, providing an additional 2,315 rooms. Three five-star hotels are expected to open in Beijing in 2020, including the Beijing Qianmen Oriental Mandarin Hotel, the Beijing Tongzhou Hilton Hotel, and the Beijing Daxing Hilton Hotel.
In the mid to long term, Beijing’s hotel market is expected to see optimistic development, as there will be tremendous opportunities with the support of new infrastructure.
Shanghai
In 2019, the annual growth rate of visitor arrivals to Shanghai slowed down. As more stringent cost controls in business travel and the huge amount of new supply, the average occupancy rate dropped 0.9 percentage points YoY to 68.4% and the ADR of five-star hotels in Shanghai decreased 2.3% YoY to RMB959 in 2019. Eight luxury hotels were opened in Shanghai in 2019.
The COVID-19 pandemic has prompted many hotel operators to delay new openings. Five new hotels with no less than 1,200 rooms that had planned to open in 2020 will likely delay their openings. Looking ahead, the opening of several theme parks after 2020 will become a driving force boosting future hotel demand in Shanghai.
Guangzhou
In Guangzhou, strong economic fundamentals and good performance in the tourism and transportation sectors fostered the positive development of the hotel industry in 2019. According to the Guangzhou Bureau of Statistics, the number of overnight tourists increased 3.7% YoY in 2019, and total tourism revenue increased 11.1% YoY. In 2019, three five-star hotels were opened in Guangzhou, adding 534 rooms to the local hotel market.
In the medium to long term, given Guangzhou’s strategic position as a national central city and a comprehensive gateway city promoted by the Central government, we expect good prospects for the development of the luxury hotel market in Guangzhou.
Shenzhen
In 2019, eight new five-star hotels opened in Shenzhen, adding 2,100 rooms in total. Owing to the large amount of new supply, the overall hotel market in Shenzhen had a lower occupancy rate in 2019 compared with that of the previous year. In 2019, the occupancy rate dropped 4.2% YoY to 68.5%. The next three years will witness a remarkable growth in the supply of luxury hotels in the Shenzhen market. By the end of 2020, there will be about 20,165 luxury hotel rooms in Shenzhen. With abundant new supply, both the occupancy rate and ADR of the hotel market in Shenzhen are expected to face downward pressure.
In the mid to long term, the Greater Bay Area plan and the action plan for Shenzhen to become a pilot demonstration area for socialism with Chinese characteristics are expected to benefit the city and drive demand for business travel. It will a growth impetus for Shenzhen’s hotel sector.
Taiwan
Taiwan’s hotel industry was supported by a stable economy and healthy tourism development. Thanks to the government’s successful efforts to reinvigorate its tourism industry through the "Tourism 2020" initiative, visitor arrivals to Taiwan in 2019 hit a record 11.84 million, up 7.2% YoY and the sharpest annual jump since 2014.
The number of tourists to Taiwan is expected to hit a record low in 2020, and the occupancy rate of international tourist hotels is expected to drop drastically. The hotel industry in Taipei is facing an extremely challenging environment, with a long-lasting impact from the pandemic.