Understand this is not just about China. It is true of the whole of Asia. And in the United States the situation is far worse. Luxury hotels are hurting.
Lily Ng, senior vice-president of Jones Lang LaSalle Hotels, says that the demand for high-end hotels in China is sinking in a downturn that is showing no fast signs of recovery.
She told China Daily, "There isn’t enough demand for top hotels in front-line cities such as Beijing, Shanghai and Guangzhou, as these markets are saturated. And the concern in the second-tier cities is whether local consumption can cover the high investment."
According to statistics from Jones Lang LaSalle the situation is far worse than we had been led to believe. Transaction volumes of Chinese hotels sank from $1.6 billion in 2006 to $1 billion in 2007 tand even further in 2008.
Understandably, four and five-star hotels are faring the worst.
According to the global hotel consulting company HVS, the top five luxury hotel markets at the Chinese mainland—Sanya, Beijing, Shanghai, Lijiang and Tianjin—reached a supply-and-demand balance in 2006 and 2007 and an oversupply in 2008.
Jones Lang LaSalle research shows that during the past four years, the supply of five-star hotels in these cities increased by 15%, while demand only grew by 10%.
Lily Ng said that currently, occupancy rates and average daily hotel room rates (ADR) at Shanghai’s high-end hotels are "not encouraging."
Amd even when the World Expo brings 800,000 tourists to Shanghai next year, less than 5 percent of those tourists are expected to check into luxury hotels.
Real Estate Channel quoted Julian van den Bogaerde, regional vice-president in China for Swissotel Hotels & Resorts, who said, "The major cities such as Beijing, Shanghai and Guangzhou have been hit harder by the economic decline. Secondary cities seem to be more stable and less affected."