New Supply Continues to Depress Operating Performance in China
The influx of new bedrooms over the last four years in China’s key destinations has continued to impact negatively on operating performance according to Horwath HTL, the world oldest and largest hospitality consulting network, during a presentation at the 8th annual China Hotel Development and Financing Conference in Beijing.
Qingdao, Shanghai and Hangzhou have all recorded supply growth levels well in excess of demand over the last 4 years, resulting in these three markets recording the largest declines in RevPAR performance during that time.
Chengdu, Guangzhou, Xiamen and Shenzhen have all recorded higher annual average growth levels in demand compared to supply and the result has been positive RevPAR growth. Sanya, on the other hand, has actually recorded a significantly larger growth level in supply, yet has managed to record the strongest RevPAR growth of all markets over the last 4 years, in both percentage growth and as an actual amount. This clearly underlies the impressive development in Sanya over the last decade.
Damien Little Director of Horwath HTL China said “I am only stating the obvious to everyone in the room that the reason for the RevPAR trends we have just seen has been excess market supply. Looking at the compound annual average growth in both supply and demand over the last 4 years, generally, supply growth has exceeded demand growth during this period. In fact, it is difficult to determine how much of the demand growth has been supply induced and how much is underlying growth in the market. Analyzing the Chinese market over the last 10 years, we can see that there is certainly a correlation between growth spurts in supply and growth spurts in demand. So certainly the introduction of new supply has been a positive factor in driving demand growth, however, in many markets we can see that the gap is too much.”
About Horwath HTL
Horwath HTL (Hotels Tourism and Leisure) is one of the world’s pre-eminent consulting specialists in the hotel, tourism and leisure industries, providing unequalled experience and expertise for client projects around the world through a combination of detailed local knowledge and international understanding. Horwath HTL is currently the world’s largest consulting organisation specialised in hospitality, with 50 offices in 39 countries.
Horwath HTL is a member of Crowe Horwath International, a professional association of accounting and management consulting firms founded in New York in 1915. Crowe Horwath International is currently ranked among the top ten international professional service groups with offices in close to 586 cities in 108 countries.