China’s Luxury Hotels Had 10% 2019 Revenue Growth

INTERNATIONAL REPORT—In 2018, China was the largest market for luxury hotels in the world, registering year-over-year (YOY) growth of 18.3% in revenue. Continuing the momentum, the country dominated the market in 2019, maintaining a YOY growth rate of 10.2%, according to data and analytics company GlobalData.

GlobalData’s industry report “Global Luxury Hotels Market to 2023” reveals that the outlook for the Chinese luxury hotel industry is anticipated to remain positive due to the growing number of inbound and domestic arrivals in the coming years. However, inbound growth in the business segment may be difficult to predict with the ongoing U.S.-China trade war.

Ralph Hollister, travel and tourism analyst, GlobalData, commented: “An increase in luxury hotel usage has been driven by the growing number of affluent Chinese consumers. Their demand for personalized and unique accommodation experiences has become more specific.”

Market growth is supported by an increase in demand for wellness retreats, red tourism and glamping. The country accounted for the highest share of luxury hotel rooms in the region in 2018 with 422,561 rooms. The market is expected to offer 658,248 luxury rooms by 2023.

Recent reports indicated that the number of high-net worth individuals (defined as those with personal investible financial assets of 6 million yuan—$864,804—or more in China) is fast approaching 1.5 million. This growth of high-yielding citizens increases the likelihood that domestic tourism may be contributing to the lion share of revenue yielded by the luxury hotel sector in China.

“In China, Marriott International, Hilton and InterContinental Hotels Group account for a major share of luxury hotels in pipeline,” said Hollister. “Hilton plans to build 1,000 hotels in China by 2025, which illustrates the profitability it associates with the Chinese market.”

Chinese destinations that regularly host large events, provide favorable local investment policies and attract large influxes of leisure and business travelers will continue to be attractive investment opportunities for multinational hotel chains.

Coronavirus Update

While the report was compiled before the novel coronavirus began to spread across China and the world, Hollister commented on how it may affect the luxury market.

“It is difficult to quantify the impact Coronavirus has already had on the luxury hotel market due to the fact it is a relatively recent development and is still ongoing,” he said. “In the short term, it is likely to pose an impact on revenues for all segments of the hotel market, whether it be budget, midscale or luxury. Hotels and the surrounding areas are incredibly public spaces where the likelihood of infection is dramatically increased due to the high number of guests concentrated in one area. This will especially deter domestic tourism and lower occupancy rates.

“In terms of international visitation, China is becoming temporarily shut off from inbound tourism,” he added. “Many major airlines that transport high-spending tourists have cancelled all flights or significantly reduced the number of flights in and out of China. Russia closed its land border to passenger travel with China and Hong Kong has shut its borders, cross-border ferries and railways. In the long-term, luxury hotels may have to reduce prices or provide incentives to entice high-yielding guests back. Safety and security is imperative for this market segment, and the impact the coronavirus has had on China’s global image may be difficult to shake off immediately.”

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