Chinese hotels reopening, but not in normal environment
 
Chinese hotels reopening, but not in normal environment
13 MAY 2020 9:04 AM

China was the first country to be confronted with COVID-19 and is the first to begin to re-emerge, with the first hotel sectors likely to be resorts and then efficient, select-service properties, sources said.

GLOBAL REPORT—The hotel-industry recovery in China is beginning to take shape.

While definitely in jogging mode, not a running one, sources said its return has begun with the domestic resort market with midscale and upper-midscale urban hotels the next likely to see life. This pattern is expect to repeat in other markets as they, too, recover.

Speaking at the online conference Hospitality Tomorrow Episode 2, the second online conference organized by Bench Events, Anthony Ross, CEO, JA Resorts & Hotels, said China has already started traveling again, but upscale and luxury hotels are struggling.

“Resorts are starting to do very well, and midscale and upper midscale hotels also are starting to see pickup. China is a very resilient place, a very business-focused place, and it will not be long before we see things back to normality,” he said.

Renee Zhang, CFO, Jinmao (China) Hotel Investment & Management Ltd., a hotel-focused investment trust, said what will take longer to re-emerge is the meetings, incentives, conventions and expositions sector.

“MICE is down, and it will be for some time. It is comprised of international travelers from global companies or from the Chinese branches of those companies,” she said.

She added internationally branded hotels would also see a slower bounce back.

Hong Kong-based Jinmao has two properties from its in-house Jinmao brand as well as seven assets from hotel chains such as Hyatt Hotels Corporation, Marriott International and Hilton.

The family owned, Dubai-based JA Resorts has responsibility for equity and debt funding and investor relationships for a series of properties, nine of which are in China and 10 of which are in high-end segments, Ross said.

It also is developing a new brand, Big Bed, aimed at Chinese millennials, the first property of which will open in October, although initially it was hoped it would open this spring, he said. Renovations at two of those upcoming hotels start this month or next.

“Our investment partner is busy purchasing and leasing hotels, and we are getting a lot of interest from people wishing for their risk to be off their table. We are also rolling out our JA brand, which is upper-midscale, too,” Ross said.

Holiday highs
The panel’s moderator René Beil, managing director of investment, development and asset-management firm Beaufort Global, said the 1-5 May Chinese Labor Day holiday resulted in 115 million trips to Chinese hotels, resulting in €6.7 billion ($7.3 billion) in revenue.

That holiday acted as the catalyst for the return of hotels, sources said, but hoteliers should not expect things to return to normal.

“Most people still are not allowed out of their hometown, but local travel has seen good occupancy and average daily rate in resorts. Occupancy in cities is still low, around 10% in Shanghai and Beijing,” Zhang said.

While occupancy in resorts in some places during those five days was higher than 70%, ADR remained lower than during the same holiday in previous years, with hotels catering less F&B and activities, she said.

The next catalyst will come from the annual National People’s Congress event, the state-organized political event that lasts 10 days, will see approximately 3,000 attendees in Beijing and will start on 22 May after a delay that pushed it back from March.

“The two meetings of the Chinese Congress will take place soon, and after that we might see further restrictions taken off, so before the summer we will see a noticeable spike, and also during summer, as parents will not be wanting to take their children out of the country,” Zhang said.

Another indication of a general return is that Shanghai Disneyland reopened on 11 May, the panelists said.

“The Chinese government has announced some expositions can take place, but this year will have no opportunities for urban hotels to recover back to normal,” Zhang said.

Ross said countering the good news is the expected economic fallout from businesses and guests watching their travel budgets.

“Our (Big Bed) midscale product will be hyper-efficient to operate, with little F&B and at the right price, so that will work, the first type to recover. We hope to open our first one in October,” he said.

Zhang and Ross said that there will be opportunities for acquisitions in China.

“A lot of state-owned enterprises might be coming to the conclusion that the hotel industry is not as simple as they thought,” Ross added.

Biel added the Muslim holiday of Eid at the end of Ramadan is expected to see additional demand, which will have hoteliers scratching their heads as to how to operate offerings like buffets.

Zhang said she is getting her employees prepared.

“We have taken a lot of extra measures in hygiene, and we need more employees even if the guest numbers are lower. We will have deep cleans of the drains and swimming pools, prepare areas to take temperatures of guests, have larger areas for check-in and provide staff to comfort those waiting in line. Food will be brought to the tables by chefs, not by guests themselves, and we will reduce the number of seats and guests at each table,” she said.

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