China's Hotel Boom Catches A Second Wind
Congee and Mahjong On The Menu
So what are Chinese looking for? Comfort and good food, like every weary traveler. Lui of the Boston consultancy recently flew an American airline between China and Chicago. More than half the passengers were Chinese business travelers, yet there was no Chinese food on the menu and no Chinese films or subtitles on the entertainment menu.
"An authentic bowl of noodles would go a long way to connect with the Chinese traveler," Lui says. InterContinental's Holiday Inn Express in China serves congee, a rice porridge often eaten for breakfast.
And just a hint of Chinese signage makes an impression with travelers.
Starwood and Best Western are among the western hotel chains whose booking websites are available in Chinese.
Another key to China's hotel boom is growth beyond the gateway destinations of Beijing and Shanghai. About 180 Chinese cities have more than one million residents. As urban infrastructure (highways and airports) has developed, so too has the demand for accommodation.
"In these cities, there's a big demand for hotel accommodation," says Dong of Best Western China.
Best Western aims to add about two to three new Chinese hotels a month. If the city offers a local tourist attraction, the guest mix is split between leisure and business. If there's no attraction in the city, about 80 percent of the hotel guests are business travelers, Dong notes.
The Outlook
Of course, all this building activity prompts concern about an overheating China hotel sector. Dong of Best Western says he's seeing hotel occupancy declining among deluxe hotels because of oversupply.
Others in China's hotel market remain cautiously optimistic, with a long-term growth strategy. "It will take a couple of years to absorb supply," Starwood's Turner says. But most of Starwood China hotel owners "are heavily equity capitalized. They don't borrow a lot of debt to do projects. ... They're more likely to sustain the down draft if the bloom comes off the rose a little bit," says Turner. "China will be the market where we have the most rooms coming on line."
Adds Zhu of Shangri-La, China's hotels have "managed a relatively healthy occupancy" despite the large number of hotels that were constructed leading up the Olympics and World Expo. Zhu sees demand outpacing supply in the next two to three years.
"China is a decades-long growth story ahead of us," Sorenson told CNBC May 2. "So the short-term issues around inflation and the rest of it are things that we take a look at but long term should not have a significant impact," he said.
No matter what the short-term outlook for China's hotels, it's clear the Chinese traveler has arrived.
By 2015, China will have 100 million outbound travelers, the largest in the world, according to Starwood figures. That's more than the number of annual visitors to France, the No. 1 international tourist destination.
And the appetite for leisure travel doesn't apply solely to international borders.
"It's even surprised me. We have business from local residents," notes Dong of Best Western China. Turns out Chinese officials are cracking down on drinking and driving. So socializing and not having to drive home is appealing. "They live in the city but during the holiday, they come to the hotel and stay for one, two nights. ... It's a change of atmosphere and you can chat with friends and play mahjong," a popular table game using small tiles.