APPD Market Report Article

Shanghai

August 26, 2022

Mike Batchelor, CEO - Hotels & Hospitality Group, Asia

-40.2%

RMB 304.2

RevPAR
Slowing

Shanghai imposes a two-month lockdown

  • As at YTD June 2022, international visitor arrivals decreased by 48.3% y-o-y to a total of 265,700 arrivals, due to the ongoing COVID-19 pandemic and continued border restrictions.
  • Shanghai eased COVID-19 curbs in end-May, after a two-month lockdown. However, demand from the business, tourism and MICE industries in Shanghai is expected to take some time to recover.

Three upscale hotels open in 2Q22

  • In the first half of 2022, new stock, accounting for a total of 853 keys, entered the market. The properties are Artyzen Habitat Qiantan Shanghai (246 keys), Hilton Shanghai Fengxian Resort (401 keys) and Ascott Sunland Shanghai (206 keys).
  • Moving forward, a total of 1,423 rooms are slated to open later in 2022. Over 80% of hotels in the pipeline will be located in Puxi.

Market performance plummets due to the two-month lockdown

  • During the lockdown, many hotels were earmarked for quarantine use, contributing to the average occupancy rates for the upscale hotel market, which was 52.3% in April and 49.8% in May. However, the occupancy rate in June was 19.6%, reflecting the actual softer travel demand.
  • Since the early March outbreak of the COVID-19 pandemic in Shanghai, the zero-COVID policy and border control measures have impacted hotel demand in Shanghai severely. As of June 2022, the market occupancy rate was at 39.6%, down by 16.8 ppts y-o-y, and market average daily rate (ADR) dropped to RMB 768.3, down by 14.8% y-o-y. The resulting RevPAR was only RMB 304.2, down by 40.2% y-o-y.

Outlook: Lifting travel restrictions may foster recovery

  • The State Council relaxed travel restrictions for travellers coming from non-high-and-medium risk areas, and also announced the cessation of marking cities with COVID-positive cases in China’s travel code. However the high transmissibility of recent COVID-19 variants such as BA.5 will likely impact the domestic travel market.
  • In addition, high-net-worth individuals and institutional investors are the most active players in the market, seeking quality, distressed hotel acquisition opportunities. China’s state-owned-enterprises (SOEs) are also actively looking to acquire strategic hotel assets held by distressed developers.

Note: Shanghai Hotels refers to Shanghai's upscale and luxury hotel market.

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