APPD Market Report Article

Shanghai

November 29, 2022

Mike Batchelor, CEO - Hotels & Hospitality Group, Asia Pacific

-37.0%

RMB 322

RevPAR
Rising

Summer travel demand aids recovery

  • As at YTD August 2022, international visitor arrivals decreased by 47.6% y-o-y to a total of 368,400 arrivals, due to the ongoing COVID-19 pandemic and continued border restrictions.
  • The growth in demand for summer leisure travel has driven the recovery of the hotel and travel industry. In the third quarter of 2022, hotels launched staycation packages, targeting local travel and leisure demand. Family groups as well as groups of friends contribute significantly to the strong demand.

Two upscale hotels open in Q3 2022

  • As at September 2022, new stock, accounting for a total of 1,375 keys, entered the market. A rebranded project, HUALUXE Shanghai Changfeng Park (312 keys), previously known as Guoman Hotel (442 rooms), opened its doors in late September. Dahua Group had purchased this asset in early-2020, converting several floors into its headquarters.
  • A notable new hotel opening in Shanghai in Q3 2022 was the Shang by Artyzen Qiantan Shanghai (210 rooms). 639 rooms are slated to open later in 2022. Another notable hotel to open in 2023 is the Artyzen New Bund 31 Shanghai, part of the commercial complex The Bund 31.

Investors foresee rationality in the hotel transaction market

  • Due to the government’s pandemic-control policies and the COVID-19 resurgence across mainland China, overall hotel performance still has room for further recovery. As at September 2022, occupancy was at 39.9%, down by 15.7 percentage points y-o-y, and the average daily rate (ADR) dropped to RMB 807.4, down 12.1% y-o-y. Revenue per available room (RevPAR) recorded only RMB 322.3, down 37.0% y-o-y.
  • Macroeconomic headwinds have resulted in lowered price expectations of both buyers and sellers in the Shanghai hotel investment market, with investors waiting for an appropriate time to make purchases.

Outlook: Travel restrictions pose challenges to market recovery

  • The upcoming National Day holiday in Q4 may bring about a slight rebound in hotel performance. However, willingness to travel may be limited due to ongoing pandemic policies in various regions and the emergence of new COVID-19 variants. The China International Import Expo (CIIE) is expected to drive travel demand and hotel performance, but tightening travel restrictions may be a hindrance.
  • High-net-worth individuals and institutional investors are the most active players in the market, seeking quality, distressed hotel acquisition opportunities. Mainland 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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