The Horwath HTL Beijing Hotel Market Sentiment Survey, part of a national initiative, has been designed to provide the Beijing hotel industry with a quick assessment of the future market outlook. The four-question survey focuses on the outlook for occupancy, average room rate and total revenue. In this mid-year survey, hoteliers have been asked to make comments on their expectations for the coming semester in comparison to the second half of 2014, as well as share attitude on the impact that the global economic uncertainties continued to have on hotel room night demand.
The report summarizes the outcome of the survey and compares the Beijing market sentiment with that of other markets across China. Of the 52 respondents from Beijing, the majority of them come from 5-star hotels (50 percent), followed by 4-star hotels at 40 percent. The numbers of participants from 3-star and budget sectors only occupy small portions at 4 percent and 6 percent respectively.
Following the similar trend of China hotel market, Beijing shows a moderate assessment of the market sentiment in the second half of 2015. The following analysis provides some useful insights as to the expectations of Beijing’s hoteliers for the remaining of the year.
As a way to measure and compare the results across regions and cities in China, we have created an index to formulate an overall average sentiment score from the last two forward looking questions. Points are assigned to each corresponding response and compounded accordingly. The index utilizes a scale of negative 150 to positive 150 in which a score of negative 150 denotes a sentiment of absolute pessimism; a zero score indicates unchanged expectations from the previous year whereas a positive 150 signifies a very optimistic outlook. The sentiment index or scores then allow trends to be observed over time.
General sentiment of the China hotel industry records a positive improving trend when compared to the corresponding period of last year, registering a national average score of positive 1. With the similar trend, almost all primary cities record positive sentiment for the rest of the year, whereas Guangzhou registers the most pessimistic score at negative 45.
Of the primary cities, Beijing records a moderate yet positive sentiment with a score of positive 2, similar to the national average (positive 1). Hoteliers in Beijing are also slightly more pessimistic than they were in the first half of the year, since the score has shown a decrease by 9 points.
Comparing across different star-ratings within Beijing hotel market, the 5-star sector registers the lowest score of zero, signalling that all sectors are holding optimistic outlook for the rest of 2015.
FIRST HALF MARKET PERFORMANCE
Question 1: Was the first half 2015 market performance better or worse than you expected at the start of the year?
In response to expectations on market-wide occupancy performance, close to 52 percent of the hoteliers replied that occupancy in the first half of 2015 was better or much better than expected; about 35 percent felt that performance was in line with expectations; while 13 percent felt that occupancy performance was worse or much worse.
Average Room Rate
More pessimistic than the other two performance indices, almost 58 percent of respondents indicated that ARR had performed worse or much worse than expected. 25 percent of hoteliers voiced that ARR performance had followed their expectations, while only 17 percent responded positively.
In terms of total revenue, over 40 percent of respondents stated that the first half market performance was worse or much worse than they expected. 21 percent reported that revenue was in line with expectations while 39 percent felt performance levels were better or much better than expected.
The index was used to gauge the average responses of respondents with regards to their actual first half performance compared to their expectation at the beginning of the year. Amongst all primary cities, Beijing held the second least assessment of actual performance levels at the beginning of the year with an average sentiment of negative 2.
In both the 5- and 4-star markets, occupancy was believed to perform better than expected with sentiment scores of 29 and 32 respectively. However, both sectors held negative assessments on overall market performance.
THE IMPACT OF Financial Crisis
Question 2: Have continued global economic uncertainties impacted hotel demand as much as you had expected?
When asked if the continued global economic uncertainties had impacted hotel demand as much as they had expected, almost 46 percent of responding hoteliers indicated that the impact of the global economic uncertainties was in line with their expectations. About 27 percent of hoteliers responded that demand was still affected more or much more than expected, within which about 2 percent of respondents voiced that the impact was much more than their expectations. Another 27 percent of hotel managers felt that global economic uncertainties had impacted hotel demand performance less or much less than expected.
Amongst all key cities, Beijing ranked the fifth from the bottom registering a sentiment of positive 3, lower than the national average at positive 11, indicating that the impact of the global financial uncertainties was almost the same as they had expected at the beginning of the year. Similar to Beijing hoteliers, respondents in Tianjin (7) and Hefei (0) also felt moderate financial impact on hotel demand.
Respondents operating 4-star hotels in Beijing felt less-than-expected financial crisis impact while recording a sentiment of positive 11. The 5-star hoteliers recorded a moderate yet pessimistic score at negative 3, reflecting the stronger impact that the financial crisis had on the 5-star market than on the 4-star hotels during the first half of the year.
SECOND HALF MARKET OUTLOOK
Question 3: What are your expectations for the second half 2015 market performance compared to the second half of 2014?
Half of Beijing hoteliers expect that occupancy performance in the second half of 2015 will be better or much better in comparison to the second half of 2014; close to 31 percent believe that performance will be in line with that recorded in the second half of 2014; while only 19 percent feel that occupancy performance will be worse.
Average Room Rate
More optimistic than the corresponding outlook of last year, more hoteliers in Beijing express moderate expectation for ARR performance in the second half of 2015. Half of the respondents in Beijing expect that ARR will, at least, remain the same; while only 37 percent of participants holding the same expectation last year.
Following the similar positive expectation, about 39 percent of respondents indicate that the total revenue performance in the second half of this year will be better or much better than the same period of last year. Only 29 percent of hoteliers expect that total revenue to experience some decrease.
The index was used to gauge the average responses of respondents with regards to their expectation of second half performance this year compared to the corresponding outlook of the same period over last year. Affected by the overall negative expectation of ARR performance, Beijing hotel market registers a moderate sentiment of positive 1.
Of the 5- and 4-star hotel markets, hoteliers express the most pessimistic outlook regarding the ARR performance for the remaining year, registering a score of negative 38 and negative 18 respectively.
HOTEL PERFORMANCE EXPECTATION
Question 4: For your hotel, what are your expectations for the second half 2015 performance compared to the second half 2014?
Over 67 percent of respondents indicate that occupancy performance at their hotel in the second half of 2015 will experience some increase compared to that in the same period of last year, within which 25 percent expect the increase to be over 5 percent. Only 19 percent of hoteliers feel occupancy at their hotel will decline in the second half of 2015.
Average Room Rate
Hoteliers hold less optimistic expectations for the ARR performance at their hotel for the rest of the year when compared to the same period of 2014. Close to 58 percent of respondents indicate that ARR will decrease in the second half of 2015. Of the 27 percent Beijing hoteliers who state ARR will experience some increase, no one believes that the increase will exceed 10 percent.
Close to 52 percent of hoteliers expect to see improved total revenue in the remaining year. About 31 percent of respondents expect total revenue to decline in the second half of 2015 when compared to the second half of 2014. The remaining 17 percent of hotel managers believe total revenue will be in line with the same period over last year.
Hoteliers in 5- and 4-star categories share the same positive expectation on occupancy performance of their properties, with both sentiments scoring at positive 29. On average, the 5-star hotel managers register the most optimistic expectation of their hotel performance for the rest of the year, while recording a score of positive 6, even higher than the Beijing hotel market sentiment at positive 3.
Similar to the national average sentiment (positive 1), Beijing recorded a sentiment score of positive 2, yet slightly lower than the sentiment of positive 11 in March 2015.
The majority of Beijing hoteliers indicated that both ARR and total revenue performance was not as well as they expected for the first half of 2015. Despite the negative expression, respondents in Beijing felt that the global economic uncertainties had impacted the market almost as initially expected. More positive than the corresponding outlook of last year, Beijing hotel managers hold a more optimistic view on market outlook and hotel performance for the second half of the year, with both sentiments this time finally increasing to positive scores.
Horwath HTL has created a new brand identity – CHAT, tilored for China’s hotel and tourism industry! CHAT, the abbreviation for China Hotels And Tourism, encourages industry people to gather, create dialogue and network through the platform, as well as exchange and share experience and knowledge. CHAT Beijing is an enhancement of the “China Hotel Development and Financing Conference”, which has been held for eleven years in Beijing. We further focus the conference specifically on hotel and tourism development and investment issues. There are 650 delegates attended 2015 CHAT Beijing with the largest segment being domestic hotel and tourism developers and owners. CHAT Shanghai is an upgrade of our annual “China Hotel Market Review and Outlook Seminar”, which has been held over the past six years. CHAT Shanghai focus on hotel asset management and operations. 510 delegates attended CHAT Shanghai in September 2015. CHAT Beijing and CHAT Shanghai held in Spring and Autumn respectively cover the full hotel and tourism business cycle from development and investment to asset management and operations. CHAT will enable you to achieve successful business development through its various powerful platforms!
About Horwath HTL
Horwath HTL is the management consulting of Crowe Horwath International that specializes in hotel, leisure and tourism industries. Established in Asia in 1987, Horwath HTL has consulted about 4,000 hotel and tourism related projects throughout the region (including over 1,200 projects in China) for clients ranging from individually held businesses to the world’s most prominent operators, developers, lenders, investors and industrial corporations. Horwath HTL now operates offices in several key cities throughout the Asia Pacific region, including Auckland, Beijing, Hong Kong, Jakarta, Kuala Lumpur, Mumbai, Shanghai, Singapore, Sydney and Tokyo. Our offices work closely together to ensure that our clients receive a multi-skilled international perspective for their projects. Horwath HTL is also supported by the Horwath database, the largest and most complete hotel and tourism related database in the world. No other firm is better positioned to meet today’s and tomorrow’s industry challenges than Horwath HTL – Experts in the hotel, tourism and leisure industries.