Despite stagnant room prices and a cooling market, major hotel chains are proceeding with aggressive expansion plans, reveals a recent report by Times Finance.
Market Slowdown and Falling Prices
The hotel industry, which posted impressive growth last year, has experienced a slowdown in the first half of 2024. Discussions around stagnant room prices, declining visitor numbers, and industry involution have been prevalent since the May Day holiday. According to a hotel investor quoted by Times Finance, the industry is fairly complex this year, with many hotels experiencing a decline in revenue compared to 2023. Even some chain hotels have seen a 15%-20% drop in营业额 (operating revenue).
Data from the Beijing Statistics Bureau shows that the revenue of accommodation enterprises with annual main business income of over 2 million yuan ($282,000) in the city fell by 1.3% year-on-year to 20.124 billion yuan in the first half of 2024. The profit total also saw a significant decline of 31.9% to 1.057 billion yuan. Similar trends were observed in Shanghai, where the second quarter saw a decline in revenue and operating profit for accommodation and catering businesses above a certain scale.
Corporate Performance and Price Adjustments
Major hotel groups such as Huazhu Group, Jinjiang Hotel, Shouyou Hotel, Yadoo Group, Juntao Hotel, and Jinling Hotel all reported revenue growth in the first half of the year. Huazhu Group, the largest among them, recorded a revenue of 11.43 billion yuan, up 14.1% year-on-year, with its China operations contributing 9.073 billion yuan, a 14.3% increase. Yadoo Hotel, known for its unique revenue structure, saw a revenue surge of 74.93% to 3.265 billion yuan, with nearly 30% of its revenue coming from scenario retail business.
However, the profit performance varied among these groups. Yadoo Group recorded a profit increase of 118% to 562 million yuan, mainly due to the sale of equity and property. Jinjiang Hotel saw a 59% increase to 848 million yuan due to disposal benefits. Most other hotel companies, however, experienced profit declines or even losses.
Average room prices have indeed stagnated, with major hotel groups reporting a decline in RevPAR (Revenue Per Available Room) and ADR (Average Daily Rate) due to the high growth base in 2023. The decline was more pronounced in the second quarter, with ADRs falling for Huazhu Group, Jinjiang Hotel, Shouyou Hotel, and Yadoo.
Expansion Despite Market Challenges
Despite the market challenges, hotel chains have not slowed down their expansion plans. According to data from Lodging Econometric, the number of hotel projects under construction and planning in China reached a record high of 3,815 by the second quarter.
Huazhu Group, Jinjiang Hotel, Shouyou Hotel, and Yadoo have all added new stores in the first half of 2024, with their in-operation hotels growing by 9.6%, 3.9%, 3.4%, and 16.7% respectively compared to the end of last year. Both Huazhu and Yadoo have also increased their store opening targets for 2024, with Huazhu raising its target from 1,800 to 2,200 stores, and Yadoo from 360 to 400 stores.
The focus remains on the mid-to-high-end market, with most of the new stores being mid-to-high-end hotels. For example, by the end of the second quarter, Huazhu Group had 10,150 stores in China, with 4,880 being mid-to-high-end hotels, an increase of about 585 from the end of 2023.
International hotel groups are also speeding up their expansion in China. In August, Hilton opened its 700th hotel in the country, marking the fifth consecutive year of opening over 100 hotels annually. In June, Accor announced the opening of its 700th hotel in the Greater China region. InterContinental Hotels Group also achieved the milestone of 700 hotels in the Greater China region in January.
Focus on Lower-Tier Markets
Lower-tier markets have become a significant growth area for the hotel industry. With the rising popularity of travel in third- and fourth-tier cities, international hotel brands are also venturing into these markets. Data from Elong shows that during the summer vacation this year, hotel bookings in fourth- and fifth-tier cities and their counties increased by 113% compared to before the vacation and by 24% compared to the same period last year, outpacing the growth in first-tier cities.
International brands are also focusing on county-level cities. For example, Wyndham Hotel Group signed a project in Gulin, Sichuan in
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