Hoteliers Look To China As Travel Business Wanes
As signs emerge that travelers are feeling squeezed by the global credit crisis, China appears to be a bright spot.
At least two global hotel chains have said they intend to expand in China, even as hoteliers feel the strain elsewhere. Actis, a private-equity investor in emerging markets, Thursday pumped $65 million into the 7 Days Inn Group, a Guangzhou-based budget-hotel operator. Warburg Pincus, another private-equity firm, is co-investing in this deal but didn't disclose details.
'We think the economic fundamentals are still very strong' in China, said Lim Meng Ann, head of Actis for China. 'We are bullish about [China's] budget [hotel] industry whether in good times or bad. We don't time the market,' he said.
French hotel operator Accor Group remains on track to triple its hotels in China, Hong Kong and Macao to 180 by 2010, a plan it announced last year, an Accor spokesman said.
Also Thursday, InterContinental Hotels Group PLC said it signed an agreement to manage six hotels in China, which will be built by Shimao Property Holdings Ltd. over the next five years. The hotelier also said it plans to launch its first boutique hotel in Asia in the next 18 months.
'We are confident in the long-term future of China . . . China's GDP continues to grow and is benefitting from the significant investment in new infrastructure being undertaken, including construction of highways and airports,' Peter Gowers, chief executive of IHG Asia Pacific, said in an email.
The robust outlook for China's travel business stands in sharp contrast to several other countries, where the industry forecasts tighter consumer purse strings, room-rate cuts and lower revenue. Atlanta-based PKF Hospitality Research, in a study released September, said demand for U.S. hotel rooms will contract for the next two years, extending last year's decline in occupancy rates.
Audit and consulting firm Deloitte, in a study on regional tourism released Wednesday, said the coming months might prove challenging for hoteliers across the Asia-Pacific region. A measure called revenue per available room was increasing by double digits across the Asia-Pacific region each month until May, Deloitte said. But in June and July, revenue growth dropped to the single digits, it said.
'Hoteliers will need to consider how they will respond if occupancy levels fall further,' said Alex Kyriakidis, Deloitte's global managing partner for tourism, hospitality and leisure.
While China's tourism outlook this year has been uncertain and officials have forecast slower growth for the country, analysts expect the Chinese market's appetite for travel to remain strong as Chinese consumers feel less pressure from the global financial crisis.
Analysts say China's gross domestic product, a broad measure of economic growth, is expected to hit about 10% this year and 9% in 2009 -- a drop from the 11.9% the country achieved last year but still high by global standards.
Passenger traffic on Chinese airlines has declined every month since May, but some of that could be related to the earthquake in southwestern Sichuan province in May and travel restrictions imposed for the Olympics in August that affected the number of tourists who could visit China. Analysts expect those restrictions to be rolled back soon, and the easing could help revive inbound travel and boost hotel stays.
Analysts say midtier Chinese hotels are least likely to benefit from China's sustained travel demand because they can't compete with such foreign brands as Marriott International Inc. on service levels or with the local budget chains on price.
'The high-end [hotels] will hold up the best,' said Shaun Rein, managing director for China Market Research Group. 'The international hotels are still getting the wealthy Chinese and the international travelers. [These hotels] have a clearly defined brand image,' he said.
Budget hotels, like 7 Days Inn, that can offer value for good service may appeal especially to younger, more cost-conscious travelers, analysts say.
Mr. Rein said he expects strong travel demand from Chinese consumers between the ages of 26 and 32 years old, who in research his company has done say they plan to travel domestically at least once in the next six months and make one international trip in the next year. Thailand, South Korea and Hong Kong are their top destinations.
'We still see every day Chinese taking vacations and spending their money,' he says. 'They don't see any fear from the global slowdown.' |
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