Demand remains stagnant in Q4 due to travel restrictions

• Suburban travel was the mainstream leisure demand in Q4 and increased significantly during the National Day holiday. According to the Beijing Municipal Bureau of Culture and Tourism, Beijing welcomed approximately 6.9 million tourist arrivals during the National Day holiday, among which 4 million visitors were from suburban areas, representing a y-o-y increase of 47.1%.  
• Demand was strongly impacted by the travel restraints in October and November, and the local outbreak in December. Only one large conference was held successfully in Beijing during the fourth quarter.

No supply is expected in the first quarter of 2023

• Xitan Beijing and Beijing Wild Goose & Pine Hotel and Resort entered the soft opening stage in the third quarter, but their official opening has yet to be announced.
• No new upscale hotels are expected to complete in the first quarter of 2023. Originally planned to open in March 2023, Hyatt Regency Beijing Daxing is now delayed to 2025.

The local hotel market remains sluggish in Q4

• Beijing market performance experienced a slump in Q4 with the occupancy rate remaining below 25% due to the pandemic outbreak in major cities across the country. The local infection peak in Beijing came in December, leading to a further decrease in occupancy.
• The 2022 Beijing market annual average daily rate (ADR) and occupancy rate reached RMB 988 and 32.9%, respectively, leading to a decline of revenue per available room (RevPAR) by 30.5% y-o-y to RMB 325. This represents 39% of pre-pandemic levels.

Outlook: Relaxation of restrictions presents opportunities for recovery

• Since December, the central government has removed domestic travel restrictions by adjusting the epidemic prevention and control strategy. Furthermore, the country will no longer conduct centralised quarantine for all inbound travellers. All these policy adjustments should stimulate demand recovery and present opportunities for the tourism and hotel industries.
• With adjustments to epidemic prevention measures and border control, the hotel market is expected to enter a period of rapid recovery in 2023. It is expected to be followed by the recovery of hotel asset values. Hence, hotel owners should sort out hotel assets, identify their market positioning, and fully use the market recovery period to improve operational efficiency and asset management.