Hotel room growth outstrips demand

The growth in the number of hotel rooms in the Chinese mainland exceeded that of demand in May, the first time since 2016, which led to a decline in the overall hotel occupancy rate, according to a report.

The report released by lodging industry data provider STR in August shows that the increase in demand for hotel rooms has slowed in recent years. Year-on-year growth in occupancy stood at 7.9 percent in 2017, 4.6 percent in 2018 and 3 percent in May.

During the period, the growth in the hotel room number moderately slowed, reporting a 3.9 percent year-on-year increase in May, still outpacing that of demand, which made occupancy growth negative, it said.

According to another report released by STR and Chinese online travel agency Ctrip in Tianjin in early September, the average occupancy rate of hotel rooms in the Chinese mainland reached 65.35 percent from January to July, down 0.8 percentage points year-on-year.

In the first seven months of this year, the increase in average daily rate - known as ADR in the industry - dropped by 2.7 percent year-on-year to 451 yuan ($60). The revenue per available room also fell 3.5 percent year-on-year to 294 yuan.

The positive market performance in 2018 didn't continue, said Liu Bo, manager of the northern Asian area of STR, when releasing the report at a forum.

The consumption upgrades and uncertainty in the economy have led to polarization of the market. Revenue per available room in luxury hotels grew 1.2 percent year-on-year in July. For midscale and economy hotels, year-on-year growth stood at 0.8 percent during the period, while that of upper upscale, upscale and upper midscale hotels saw a decline, according to the report.

Tan Ling Wei, vice-president of hotels and hospitality business at property consultancy firm JLL, said due to the imbalance of supply and demand, the hotel market in the Chinese mainland faced some challenges in the last decade. However, the market has warmed in recent years driven by booming domestic tourism, with hotel businesses embracing unprecedented growth in 2018.

She added that although hotels in some Chinese cities witnessed a downward trend this year, it would only be short-term. As growth in supply slows to a reasonable pace, hotels are expected to enter a phase of ADR growth.

"In addition to increasing occupancy and ADR, hotels also need to optimize operation and improve profitability," she said. "Owners and operators can look into reinventing the underutilized hotel space to drive revenue, such as the recent trends of converting banquet halls into multifunctional coworking spaces, as well as reducing labor cost by introducing new technologies that can help improve staff productivity."

chenmeiling@chinadaily.com.cn