China's hotel industry outlook challenging as wider economy slows

PUBLISHED : Tuesday, 11 August, 2015, 11:29pm
UPDATED : Tuesday, 11 August, 2015, 11:30pm

The hotel business in China is sensitive to the overall economy and therefore the outlook is challenging, said Tom Cheung Ling-fung, the chief executive of Hui Xian Asset Management, which runs Hui Xian Real Estate Investment Trust.

Hui Xian, controlled by Cheung Kong Property Holdings, is the first yuan-denominated reit listed in Hong Kong, with its core asset being the Oriental Plaza, an 800,000 sq metre mixed-use development in Beijing. It also owns a hotel in Shenyang and a shopping mall in Chongqing.

"The hotel sector is sensitive to the economy. Clients have stopped organising big events," Cheung said.

In the first half to June, Hui Xian reported a 9.8 per cent growth in net property income to 1.03 billion yuan while distribution to unit holders rose 10.1 per cent to 730 million yuan.

Annualised distribution yield was 7.9 per cent.

While Hui Xian has achieved stable revenue growth from office, retail centres and serviced apartment businesses, the hotel division saw a drop. For example, Grand Hyatt Beijing's average occupancy was unchanged at 55.5 per cent, but the average room rate per night was 1,540 yuan, a drop of 3.6 per cent from a year earlier.

"The outlook for the sector is challenging," Cheung said. "We have started organising more small events to offset the loss of big event businesses."

However, the pace of the business decline had slowed, he said.

Cheung said the slower growth would not have a significant impact on Hui Xian as the hotel operations accounted for only 5.8 per cent of its business.

In C-Suite, Cheung talks more about the commercial property market and business environment in mainland China.