DECLINING demand for hotel rooms in Guangzhou is forcing hoteliers to convert their space into long-lease apartments and commercial units. The average occupancy rate in the province slipped from 1993's high of 63 per cent to a poor 56 per cent, the China Daily Business Weekly said. During the slack months of February and March, four and five-star hotels had been forced to slash tariffs to as low as US$30, it said. Annual room prices in Guangzhou were between US$120 and US$140 per night, compared with Beijing's US$180 to US$240. To weather the low demand, expensive hotels were leasing out rooms at a huge discount to long-term residents on three-month to two-year terms. Alternatively, rooms were being turned into much-needed commercial offices. About 30 per cent of the 410-room Holiday Inn City Centre Guangzhou had been converted to long-stay rooms and serviced apartments, executive assistant manager Marc Tay said. Room rates for the long-term lease amounted to US$55 to US$65, substantially lower than the US$70 to US$75 rate offered daily. During the 12 months to September, the hotel experienced a decline in occupancy to 73 per cent from 75 per cent averaged a year ago. Daily room rate was fixed at an average US$84 at the beginning of this year, while long-stay rooms were priced at an average US$60. The fall in overall room rates during the year had narrowed the gap between the daily and long-term rooms, hence the conversion had not resulted in a substantial drop in profit margin, Mr Tay said. The hotel also converted two floors into commercial space. Another luxury hotel, The Garden Hotel Guangzhou, converted 10 per cent of its 1,023 rooms into serviced apartments. An additional five per cent would be converted by the end of the year. The long-stay rooms were priced at an average US$50 per day, up to 58 per cent lower than the normal daily rate of US$100 to US$120. The move cost the hotel two to five per cent of last year's gross profit, general manager Louis Chung said. Blind construction during the real estate boom of the early 1990s has left Guangdong with 838 hotels and 100,000 rooms. About 60 million guests would be required to achieve 80 per cent occupancy, but only 30 million stayed in the hotels last year. Hoteliers believe a slowdown in the Chinese and Hong Kong economies is the major reason for the gloomy sales, not the swelling room supply. 'Room supply for the four to five-star category hotels has been fairly stable in the region and there will not be any new luxury hotels coming up in the next two years,' Mr Tay said. 'More business travellers are living on budget travel expenses and they tend to cut their period of stay. Many of them also prefer to stay in Hong Kong as transport across the border is very convenient now,' Mr Chung said.