These are the trends reshaping China’s hospitality industry | Techsauce

These are the trends reshaping China’s hospitality industry

China’s domestic tourism industry has seen considerable growth over the past decade. According to China National Tourism Administration, China registered 4.44 billion domestic travels in 2016, generating RMB3.9 trillion in domestic tourism revenue compared to 260 million inbound and outbound travels.

Driven by China’s expanding middle-class households with disposable income, the rapid development of road and rail networks, and affordable domestic air travel, the popularity of weekend getaways and short stay holiday packages is gaining momentum and has given rise to mid-scale hotels.

While demand for typical holidays involving luxury big brand hotels and large tour groups continues, today’s discerning Chinese tourists seek new and unique travel experiences. This new breed of domestic travelers is shaping the future of China’s hospitality industry towards experiential traveling and hotels.

Shanghai's skyline at night

Experiential traveling and hotels

One area that hoteliers have become especially interested in China is the establishment of boutique hotels. Unlike big brand hotels, boutique hotels have a strong focus on lifestyle, offering customers a memorable and unique experience that comes from a combination of great location, stylish design, and gourmet cuisine.

Wellness tourism is also gaining popularity in China. These retreats offer integrated health experiences and lifestyle coaching to relax the body and destress the mind. While most hotels provide spas, yoga and detox programs, some wellness resorts offer a more traditional approach with in-house physicians to prescribe traditional Chinese medication for guests.

The same goes for eco-resorts that have a strong focus on sustainability for the environmentally conscious travelers. Operators who embrace and implement green initiatives will benefit from operational savings and the growing market for environmentally friendly resorts.

We're also starting to see a rise in the development of themed hotels as they become an integral part of large-scale theme parks such as the Disneyland Hotel and Toy Story Hotel at the newly opened Shanghai Disneyland.

The inside of Jin Mao tower containing Grand Hyatt Hotel Shanghai

Strategic alliances and joint ventures

With increased competition from local Chinese hoteliers and the government’s aim to retain as much domestic tourism spending within China as possible, international brands looking to gain market share in China will have more success through strategic alliances and joint ventures such as the recent merger of Marriott International with Starwood Hotels & Resorts Worldwide.

Major international hospitality brands such as Marriott, Sheraton, Hyatt, and Intercontinental have had a presence in China for several decades, but mainly as hotel managers and operators while investors have primarily been local developers.

Although there has been some foreign investment into large mixed-use projects, which include hotels from international developers such as CapitaLand, Tishman Speyer, Hines, and Portman, there are high barriers to entry. The Chinese government owns all land in China and leases commercial space on a 40-year term to developers, better positioning well connected local developers with access to loans from China’s state-owned banks to acquire financing and planning approvals.

Other factors that would deter foreign investment in the Chinese hospitality market include the nation's complex legal system, the perception of protectionism, bureaucracy and treasury controls. While free trade zones have assisted foreign investors within the manufacturing and hi-tech sectors, they have not had the same impact in the hotel industry.

Outbound investments

There has been an upward trend of Chinese outbound investment in recent years. In 2016, Chinese investments in the US, Europe and other markets abroad amounted to RMB1.12 trillion (USD161 billion), approximately an 80% increase from the year before.

One highlight was when Chinese conglomerate HNA Group acquired a quarter of Hilton Worldwide Holdings for about USD6.5 billion from Blackstone Group. Another deal involving Blackstone Group was the sale of Strategic Hotels & Resorts to Anbang Insurance Groups who were in the race for Starwood until Marriott closed the deal.

So, what can we expect in 2017?

Despite the Chinese government announcing tighter measures on outbound investments and the potential weakening of the Renminbi, interest from Chinese investors remains favourable.

We can also expect to see the steady rise in China’s middle class, with their increased spending power, fuelling continued demand for Chinese tourism destinations. New government-supported tourist areas such as Shangri La, Lijiang in Yunnan, Guilin in Guanxi, Xian, and Chengdu will benefit from government and corporate investment to meet this demand. International tourist numbers are also expected to rise with easier visa relaxation now allowing short-term (six days) transit tourists.

In addition, the rapid growth in high speed rail links is making travel to more remote areas easier as air traffic congestion restricts growth in air travel. The many projects that are now being planned will provide continued work for consultants and contractors alike.

 

About Faithful+Gould:

Faithful+Gould is a world-leading Integrated Project and Program Management Consultancy that supports clients with the construction and management of its key assets, important projects and programs.

In Asia Pacific, Faithful+Gould is headquartered in Singapore and has a team of more than 300 professionals working from our strategically located offices in Singapore, Malaysia, India, Hong Kong and China.

Faithful+Gould is a part of the Atkins Group and therefore enjoys the security and technological benefits that being part of an 18,000 strong business brings. Atkins in its own right is a leading engineering and design consultancy and is one of the world’s leading providers of professional technological based consultancy and support services.

Follow Faithful+Gould for more industry news via its website or social media:

URL: www.fgould.com

LinkedIn: www.linkedin.com/company/faithful-gould

Twitter: @fgouldconnect

 

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