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In-depth: Coronavirus causes dip but China hotel investors stay carefully optimistic

by | 02 Mar 2020 | News

Investors still bet on the Chinese market and sign new hotel projects at home and abroad.

Despite the coronavirus spreading and wreaking havoc in China’s hotel market, international hotel developers remain optimistic, both in China and abroad.

While the coronavirus and political unrest in Hong Kong have had a strong impact on the region’s hotel industry, experts don’t believe the bad times will last.

We find out more about how the local hotel market is getting through these challenging times and how international players still be on Chinese outbound travellers. 

A glum outlook in Hong Kong

Hong Kong’s hotel sector can’t seem to catch a break these days. After political unrest resulting in a 63% drop in RevPAR (revenue per available room) in the last three months of 2019 and an average RevPAR drop of 27% for the full year, now the coronavirus is haunting the city state’s hotel industry. 

Local sources say occupancy and inbound traveller numbers are currently looking even worse than during the SARS outbreak in 2003. Currently, numbers show around 3,000 arrivals a day, down from an average of 100,000 in January and 200,000 at the same time last year.

Faced by this challenge, the Federation of Hong Kong Hotel Owners, a group of 86 members representing names such as Peninsula, JW Marriott, Hyatt and Shangri-La among others, is calling on the Hong Kong government to introduce tax breaks to lighten the load hotels have to bear.

Keeping faith in China’s recovery

China has faced similar struggles, but the country’s size has somewhat cushioned the blow so far.

Hotels are still not doing great there right now though. InterContinental Hotels Group (IHG) reports having temporarily shut down 170 of its 470 hotels in China. Hilton took 150 of its 225 properties off the market for the time being and expects to lose up to $50 million because of it. Other leading hotel groups report similar numbers. 

Despite this, at least IHG remains optimistic and has faith in the Chinese market’s recovery once the coronavirus is under control or subsides. 

Looking back at the SARS outbreak in 2003, IHG’s chief executive Keith Barr was recently quoted saying: “The thing is it just bounces back. It’s a steep drop but a strong recovery” by the Financial Times.

Since IHG just signed six new properties across China and for the regional hotel market in general, it would be great if he was proven right.

A unique property, specifically for Chinese guests

While IHG and other international brands keep expanding in China, Shanghai-based Macro Capital Limited and the Australian Pearllargo are partnering on the Kaleidoscope Resort in Western Australia, a $12.2 million project. 

This isn’t just another 5-star resort though. The 68-key property will sit close to the Hutt Lagoon which is known for its breath-taking pink colour. And as if that weren’t it, what really sets this resort apart, is that it targets only Chinese travellers and will not even be advertised outside of China. 

Due for completion in late 2022, the hotel will feature Cantonese- and Mandarin-speaking staff, and traditional Chinese cuisine to make guests feel at home. 

Leisure offerings will include wellness and spa facilities, pools, as well as the option to go for an unforgettable sunset horseback ride on the stunning pink beach.

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