Hotel investment on the Chinese mainland returns to pre-virus level
Hotel investment on the Chinese mainland in 2021 recovered to pre-COVID-19 levels of around US$2.1 billion, and such momentum will likely extend through 2022, according to the annual Hotel Investment Outlook released on Monday by global property consultancy JLL.
The recovery was mainly attributed to notable improvement in RevPAR – or revenue per available room, a key metric used to measure hotel performance – as well as demand for short-distance trips and staycations, which helped improve the performance of luxury and high-end hotels.
"We expect to see active transactions in the Chinese hotel market in 2022, driven by private equity's record level of capital as well as developers' strategies to divest non-core assets and improve balance sheets under the 'three red lines' policy (a scheme to limit developers' debt ratios)," said Zhou Tao, managing director of the Hotels & Hospitality Group, JLL China. "Additionally, the industry needs to increase hotel management capabilities to navigate operational hurdles brought on by labor shortages, rising inflation, supply chain issues, sustainability and the impact on service levels given the difficulties operating in such an environment."
The lobby of Hyatt on the Bund. Shimao Group last month agreed to sell the 631-room luxury hotel in downtown Shanghai to city government-backed Shanghai Land Group for 4.5 billion yuan (US$713 million). The cash-crunched developer intends to use 80 percent of the proceeds to reduce its debt.
With border controls unlikely to be lifted in the first half of 2022, China's hotel market will continue to be driven primarily by domestic tourism. Meanwhile, as vaccination rates continue to rise, demand for travel will continue to grow, which JLL believes will benefit the broader market.
In the Asia Pacific, hotel investment was US$8.5 billion last year, 39 percent higher than 2020 but still 40 percent below pre-COVID levels in 2019. Globally, hotel transaction volume surged 131 percent year on year to US$66.8 billion in 2021, according to JLL.
