BUSINESS travellers are expected to dominate future demand that will push occupancy levels and room rates in Shanghai hotels to record levels by the end of this year. Effects of Beijing's economic austerity programme and the existing moratorium on new hotel projects in Shanghai will limit future development, but allow the hospitality industry breathing space to ensure real growth. Research released this week by Hong Kong-based Horwath Asia Pacific says five-star hotel occupancies will reach international levels with average occupancies of 76 per cent by the end of the year, up from 65 per cent in 1992. The average daily room rates for five-star hotels, which grew from US$65 in 1990 to $72 last year, is expected to increase to $99 by the end of the year, in line with increased occupancy. Horwath Asia Pacific group managing director Robert Stiles said this demand was expected to be dominated by the commercial market segment with the five-star hotels in Shanghai catering to about 71 per cent of business travellers. With extensive waiting lists for serviced apartments and other accommodation suitable for expatriates, demand for hotel rooms from the long-staying guests is expected to grow in the near future. The four-star properties and the competitive three-star hotel are expected to attribute most of their demand to the commercial market and will also see new levels of occupancy and room rates. Mr Stiles said the group and tourist markets were expected to represent secondary demand segments in Shanghai, which were attracting more commercial travellers because of strong economic growth and a favourable investment environment. Analysts predict the supply of rooms will remain tight throughout other major cities of China as austerity measures aimed at cooling down property development take a hold. Colliers Jardine director Bob Chambers said it would become increasingly difficult to gain approvals for tourism projects and it was unlikely any significant number of new hotels would be built in the short to medium term. Existing properties, which suffered a decrease in visitor arrivals in 1989 and 1990 following the Tiananmen Square pro-democracy demonstrations, will be in a prime position to benefit as China's economy continues to stimulate demand from business travellers. Editorial and research director at Travel Business Analyst, Murray Bailey, said the demand for hotels in China was so strong that revenue per room had increased by as much as 50 per cent since the start of the year. The Asian tourist market is predicted to be the biggest growth area, with international hotel groups such as Holiday Inn, Shangri-La and Accor Asia Pacific. Mr Stiles said it was estimated 920 new rooms would be added to the competitive Shanghai market by the end of 1998, an increase of nine per cent in new rooms over the 1992 level. The only dark cloud on Shanghai's tourism market is the constraints of airline passenger capacity which left an estimated 30 per cent of those wishing to travel to China unable to get a seat.