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.
The sentiment of Shanghai has almost remained the same when compared to the previous report in which it scored of positive 40 in March this year. While ranking the first with a score of positive 38, the Shanghai hoteliers express steady and positive confidence for the market performance outlook in the second half of 2015.
Within the Shanghai hotel market, the 4-star sector retains the most positive outlook for the rest of 2015, with a sentiment score of positive 42, while the 5-star sector records a slightly lower average score of positive 37, signalling a less optimistic expectation.
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, half of the hoteliers replied that occupancy in the first half of 2015 was better than expected; 20 percent felt that performance was in line with expectations; while only 12 percent indicated that occupancy performance was worse.
AVERAGE ROOM RATE
Although lower than the other two performance indices, a vast majority of respondents stated that the ARR performance was not as bad as they had expected. 36 percent of respondents voiced that ARR performance had followed their expectations, with another 42 percent of hoteliers holding positive assessment.
In terms of total revenue, 66 percent of respondents stated the market’s first half performance was better or much better than they expected. 24 percent reported that revenue was in line with expectations while merely 10 percent felt performance levels were worse than expectation.
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 key cities, Shanghai held the most optimistic assessment of actual performance levels at the beginning of the year with an average sentiment of positive 43, followed by Shenzhen (36) and Hangzhou (27).
In the respective star categories, all submarkets indicated that the first half market performance was better than expected, with the 5-star market registered an average sentiment of positive 40, slightly lower than the Shanghai market average at positive 43.
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, the majority of 66 percent of responding hoteliers indicated that the impact of the global economic uncertainties was in line with their expectations. Approximately 18 percent of hoteliers responded that demand was still affected more than expected. Another 16 percent of hotel managers felt that global economic uncertainties had impacted hotel demand performance less than expectation.
Amongst the key cities in China, Shanghai ranked the third from the bottom registering a sentiment of negative 2, lower than the national average at positive 11, indicating that the impact of the global financial uncertainties was almost the same yet in a negative way as they had expected at the beginning of the year. Other cities recorded negative financial impacts are Huizhou (-13) and Chengdu (-12).
Different from its Beijing 4-star counterpart, respondents managing 4-star hotels in Shanghai felt moderate impact caused by global economic uncertainties on hotel demand, while recording a sentiment of zero. The 5-star hoteliers, on the other hand, recorded a slightly pessimistic score at negative 2, reflecting the stronger impact that the financial crisis had on the Shanghai 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?
72 percent of Shanghai hoteliers expect that occupancy performance in the second half of 2015 will be better or much better in comparison to that in the second half of 2014; whereas only 8 percent believe that performance in the second half will be worse. The remaining 20 percent feel that occupancy performance will be the same.
AVERAGE ROOM RATE
Only 16 percent of hoteliers indicate that ARR will perform worse than expected. 32 percent of respondents expect ARR performance will be the same. The remaining 52 percent of Shanghai hoteliers prepare to see improved ARR performance for the second half of 2015 when compared to the same period in 2014.
Following the same optimistic outlook, about 68 percent of respondents believe that total revenue in the second half of this year will be better or much better than the same period of last year. About 18 percent of hoteliers expect that total revenue performance in the second half of 2015 to be consistent with the corresponding period of 2014, while 14 percent expect total revenue to decline.
The index was used to gauge the average responses of respondents with regards to their expectations of second half performance this year compared to the corresponding outlook of the same period over last year. Amongst the key cities, Shanghai records the highest average score of positive 42.
The 4-star submarket expresses more positive outlook for the second half 2015, registering an average sentiment of positive 53; whereas the 5-star submarket records a lower score of positive 39.
HOTEL PERFORMANCE EXEPCTATION
Question 4: For your hotel, what are your expectations for the second half 2015 performance compared to the second half 2014?
Over 76 percent of respondents expect occupancy performance at their hotel in the second half of 2015 to increase; 16 percent expect occupancy to decline, while 8 percent of hoteliers feel occupancy at their hotel will remain the same.
AVERAGE ROOM RATE
Similar to the occupancy performance expectation, about 72 percent of hoteliers hold optimistic outlook for the ARR performance at their hotel for the rest of the year when compared to the same period of 2014. 18 percent of respondents indicate that ARR will decrease; while 10 percent Shanghai respondents state that ARR will be the same.
72 percent of hoteliers expect to see improved total revenue in the second half of the year while compared to the same period of last year. About 10 percent of respondents believe total revenue will be in line with that in the second half of 2014. The remaining 18 percent of Shanghai hotel managers expect revenue to decline, within which 16 percent believes the decline to be less than 5 percent.
Amongst key cities, Shanghai records the highest average sentiment score at positive 34, reflecting the optimistic expectation that Shanghai hoteliers hold for their hotels’ performance in the remaining of the year.
Respondents operating 4-star hotels register a lower average sentiment score at positive 31, with occupancy, ARR and total revenue scoring at 38, 19 and 38 respectively; whereas the 5-star market records the same average sentiment as the city market at positive 34.
Overall, Shanghai market kept its positive improvement trend, with a sentiment score of positive 38, almost the same as the sentiment at positive 40 in March this year.
The first half 2015 hotel market performance was almost the same as expected across China; whereas Shanghai expressed positive assessments, attributed to the well-performed occupancy and total revenue performance. Looking forward, respondents still feel confident on hotel performance for the remaining of the year.
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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.