China’s Burgeoning Hotel Sector

The Olympics, a booming travel sector, and increased consumer spending fuel rapid growth throughout the hotel industry.

According to recent reports, Dubai’s distinctive Burj Al Arab Hotel may not be the world’s only “seven-star” hotel for much longer. Located near the Bird’s Nest and Water Cube in northern Beijing’s Olympic Green area, the soon-to-open Beijing 7-Star Hotel is not shy about stating its intent. When it opens in March 2008 as part of Beijing Seven Star Morgan Plaza, the hotel promises unrivalled luxury and panoramic views of nearby avant garde Olympic architecture.

Upbeat projections about the future of China’s travel industry help to explain the recent frenzy of hotel building. The Chinese hotel market, currently worth around $15 billion in annual gross revenue, is growing at an annual rate of about 15 percent, thanks mostly to a surge in domestic travel, as a booming economy feeds into disposable income. By 2010, the number of domestic tourists is forecast to soar from 1.2 billion to about 1.8 billion.

China’s increasing international appeal as a holiday destination is also fueling the hotel boom. Already the world’s fourth most popular tourist destination, China is expected to move into second position within a decade, according to the World Tourism Association. By 2020, China is forecast to overtake the US as the world’s most-visited country, pulling in some 130 million visitors a year.

The Beijing 7-Star Hotel represents one extreme of China’s rapidly expanding hotel sector. Numerous hotel chains, both domestic and overseas, are now rushing to meet growing demand at all levels of the Chinese market. The results of a recent survey show that 188 of the 386 hotels projects being actively pursued throughout Asia are in China, and 134 of those are at four or five star rates. There is also an expanding one, two and three-star range of hotels emerging with limited F&B and leisure facilities and basic rooms.

According to property agency Jones Lang LaSalle, Beijing now has 351 “star rated” hotel properties, with short-term growth fueled by Olympic demand. Shanghai is projected to have 8,000 more four and five-star hotel rooms by 2008. Apart from the first-tier cities of Beijing and Shanghai, places such as Shenzhen, Suzhou, Dongguan, Shenyang and Tianjin are emerging as key secondary cities for corporate travel. These cities are also seeing the arrival of hotel chains that offer luxury accommodation.

The Jumeirah Group from the United Arab Emirates, which runs the Burj Al Arab, will open its first China hotel - the 338-room HanTang Jumeirah Shanghai – in the city’s Xintiandi district next year. Another well-known name, Conrad Hotels & Resorts, a luxury brand under Hilton Hotels Corporation, which runs 18 hotels globally, has also recently announced it will open its first mainland facility in Shanghai in 2008. Earlier this year RREEF, the property investment arm of Deutsche Bank, announced it will develop at least 25 hotels in China at a cost of US$550 million, along with private equity partner H&Q Asia Pacific.

In addition, Kempinski, Europe’s oldest luxury hotel firm which now runs 11 properties in China - eight hotels and three resorts - says it plans to boost its portfolio to 21 by 2010 as it reinforces its role as a key player in the China’s upmarket hotel sector. According to senior management, Kempinski will open hotels in Shanghai, Hohhot, Huizhou, Qingdao, Tianjin, Wuxi, Xi’an, Suzhou, Guiyang and Yinchuan within three to four years.

Seven Star Morgan Plaza Video
Images: Daniel Allen

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