Calendar shift softens China’s occupancy, ADR recovery
Calendar shift softens China’s occupancy, ADR recovery
17 JUNE 2020 7:40 AM

A 2019 calendar shift softened the recovery of China’s hotel occupancy and average daily rate during the first week of June 2020, but luxury and higher-tier hotels are catching up to the lower-class segments.

SINGAPORE—The rebounds of China’s hotel occupancy and average daily rate are slowing, but higher-tier hotels are beginning to catch up to the those at the lower end, STR data shows.

In his weekly data takeaways video, Jesper Palmqvist, area director of Asia/Pacific at STR, said through the week of 6 June, China’s hotel occupancy growth has slowed, in part due to a 2019 calendar shift of the Chinese Dragon Boat Festival (7 June). (STR is the parent company of Hotel News Now.)

“We’ve now seen four weeks where occupancy is not growing as quickly as it did earlier, but if you look at occupancy recovery, which is now broad, as first-tier cities grew faster to even out the current position where many markets now sit only 20% to 25% behind last year’s levels at this time,” he said. “But how can things improve and still not grow? The answer is that last year’s occupancy actually declined slightly during this time due to calendar shift in holidays. The Dragon Boat Festival in early June last year created reduced travel dates as people waited for the holiday and worked up until the festival.”

Source: STR, © 2020 CoStar Realty Information, Inc.

Similarly, average daily rates at Chinese hotels are not rebounding as quickly, Palmqvist said.

“We are seeing more trends around this now becoming a race for demand and capturing share, given that we are not yet at normal levels,” he said. “We see discounting in many places certainly across (online travel agencies), and this pricing challenge seems to limit that rate growth at the moment. But bear in mind the perspective, rates are within 20% of last year, so still a bit ahead of occupancy from that sense.”

Across the country’s hotel class segments, occupancy at midscale and economy properties has outpaced the higher classes throughout much of the pandemic. In the past week, occupancies for luxury, upper upscale, upscale and upper midscale have gained ground on the lower segments.

Source: STR, © 2020 CoStar Realty Information, Inc.

“The last two weeks of May, there’s visible growth across all classes as expected, but it’s in the last week, and even also seen in the last few days, where high-end hotels are quickly gaining ground and closed almost half of that gap from just 10 days ago,” Palmqvist said.

It’s tempting to use the performance trends in China as a model for the rest of the world, but Palmqvist said the trends are unlikely to be “one-size-fits-all.”

“Take the U.S. and China, for instance. Of course, there are similarities seen already, as in (recovery) starts with economy hotels that are either local or in drive or train distance over weekends,” he said. “But remember other factors, too, like the starting point. China was wiped to almost zero percent occupancy and then rebuilt. The U.S. didn’t really yet hit numbers that low. Consumer spend confidence and readiness can vary.

“China’s signals are already showing a reluctancy to spend post-crisis with unemployment and a tendency to consider saving, but group and events are more likely to return at a reasonable pace in China with a July calendar that is already piling up around the country, (and that is) not necessarily the case in the U.S.”

Food and beverage
The Chinese hotel industry’s percentage of food-and-beverage revenue has mostly declined in the past few years across the country’s four major cities: Beijing, Shanghai, Guangzhou and Shenzhen.

Source: STR, © 2020 CoStar Realty Information, Inc.

The F&B revenue share ranges from 25% to 30% in China, and the pandemic could cause Chinese hoteliers to find new ways to grow F&B spend among guests, Palmqvist said.

“The interesting bit will be moving forward: How will these cities trend and innovate to create a new baseline to grow from for F&B outlets?” he said.

Source: STR, © 2020 CoStar Realty Information, Inc.

For more, watch the video recap below.

Editor’s note: The video included in this article was filmed by STR’s Jesper Palmqvist, on 11 June and edited and produced by CoStar Group. HNN is a division of STR, a CoStar Group company.

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