Hotel expansion in China under threat

Low occupancy in China endangers international hotel race

Poor demand for hotels in China as the race among international hotel chains to open large hotels across the country means that as many as four in 10 rooms remain empty. Hotel companies such as Hilton Worldwide, InterContinental Hotels and Hyatt Hotels Corp are investing heavily in the biggest of the emerging markets.
But occupancy in China rate was 61% for the first nine months of 2011, unmoved from the same period last year. This is also the lowest in Asia apart from India. Occupancy in Singapore and Hong Kong is more than 80%, but in Shanghai it’s only 50%.
“Hotels in some markets of China are clearly oversupplied in the next three to five years, and they won’t be generating good returns,” Nigel Summers, director of the hospitality industry analysts Horwath Asia Pacific, said. “China has had a very strong demand. The question is whether the increase in demand is going to be big enough to handle all the new hotels.”
Bloomberg Businessweek
[pictured: InterContinental Century City Chengdu; courtesy IHG]