The hotel markets in five major cities of Greater China have experienced the start of recovery since last year with room rates rising and occupancy growing, according to Knight Frank. It predicts the outlook will continue to improve.
Hotel demand - hit by the global financial crisis in 2008 - has been picking up since last year with average daily rates rebounding 10.5 per cent year on year, said the property consultant in a report, which has surveyed the hotel sector in Beijing, Shanghai, Guangzhou, Hong Kong and Macau.
Occupancy and room rates remained stable in the first six months on the back of strong demand from tourists and business travellers. In Beijing where demand mainly was driven by domestic visitors, five-star hotel occupancy fell in 2008 and hit a low in 2009, due to oversupply. However, occupancy levels showed signs of recovering and continued to remain above 60 per cent for the first half of the year.
The average daily rate for a five-star hotel room bottomed in 2009, but saw a 8.4 per cent rebound last year to 814 yuan (HK$1,024). The rate remained stable in the first half of this year at 794 yuan.
The confidence in the outlook has given a boost to the sector, encouraging hotel owners and operators to strengthen their foothold in the cities.
'Among the five cities covered by this report, Macau was the most active market in the first half of 2011, where three large-scale, five-star hotels were completed in the period, providing over 4,000 rooms,' Thomas Lam, head of Knight Frank's research department, said in the report.
Five hotels, including Waldorf Astoria Shanghai on the Bund and Shanghai Pudong Kangqiao, also opened in Shanghai, adding more than 2,000 more five-star rooms.
Despite the increase in supply, Knight Frank predicts a rosy picture.
'We believe China's tourism market will continue to develop rapidly in the coming years and the future for its hotel market looks bright,' said Lam.
In Shanghai, the number of overnight visitor arrivals - especially domestic visitors - is expected to be boosted with the completion of major tourism projects such as Shanghai Disneyland in 2015 and infrastructure projects including the Huning Intercity High-Speed railway in the Yangtze River Delta region.
While the hotel sector in Guangzhou will benefit from the city's position as the business and exhibitions centre of Asia, Beijing will continue to generate a steady stream of visitors, said Knight Frank.
According to the World Tourism Organisation, China has surpassed Spain to become the world's third most-visited country, while it ranks fourth in terms of tourist receipts.
International hotel operators also show strong confidence in China's market with aggressive expansion plans. Sheraton Hotels & Resorts has said that about two-thirds of the 25 new hotels it has planned will be situated in mainland China.
Hotel markets in Hong Kong and Macau are expected to remain stable, as the cities are already well developed, it said.