A look at recent hotel performance and supply development trends across China. China's hotel industry in 2017 saw strong revenue per available room (RevPAR) growth, up 5.6 percent over 2016. Supply (+3.7 percent) came in at the slowest rate of the past decade, which helped occupancy grow in several key markets. It was also the country's first year of ADR or average daily rate growth (+1.2%) since 2013.

Looking at supply development, China's second-tier cities are seeing higher rates of growth than the first-tier cities. This has brought both opportunities and challenges for markets like Xi'an, Hangzhou, Tianjin, Wuhan and Dalian, which have seen rate declines over the past few years. Thanks to a boom in leisure domestic travel, these markets saw growth in both occupancy and rates.

Hangzhou's year-on-year performance levels were impacted slightly following the G20 summit in September 2016, but recovery was quite quick thanks to the Chinese New Year and summer holidays. Leisure and corporate demand levels are on a steady track throughout most of the country. After struggling from substantial supply growth in recent years, some markets in western China, such as Xi'an and Chengdu, posted strong occupancy levels in 2017 - with Xi'an coming in the top five major Chinese markets in terms of occupancy growth.

Among the top-tier cities, Shenzhen recorded the highest actual occupancy level (85 percent), followed by Shanghai. ADR growth was also strong in these markets, with a number of new notable attractions in Shanghai, such as the Disneyland resort that opened in the summer of 2016 and the new National Exhibition and Convention Center at Hongqiao International Airport. Although Beijing is falling slightly behind, the capital's hotels recorded their best summer since 2009, the year after hosting the Summer Olympics.

Looking ahead, hotel operators will likely focus on driving ADR to bring up their gross operating profits or GOPs.

This article was originally published in STR's Global Hotel Study, a comprehensive overview of the hospitality industry covering over 100 markets worldwide.

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