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China – February 2021 MARKET IN MINUTES Hotel Savills Research Savills team Please contact us for further information Tourism bounces back RESEARCH James Macdonald Despite the unprecedented headwinds earlier in 2020, hospitality metrics are Senior Director nearly back to last year’s levels. China +8621 6391 6688 james.macdonald@ savills.com.cn • First-tier cities’ five-star hotel’s average daily rates (ADRs) • Hotel investment deals in China reached a total stood at RMB717.9 in Q3/2020, a decrease of 8.5% year-on- consideration of RMB8.15 bn in 2020. year (YoY), revenue per available room (RevPAR) stood at HOTELS RMB349.5, down 37.2% YoY while occupancy rates stood at Michael Roberts 49.1%, down 21.8 percentages points (ppts) YoY. Director Asia Pacific • For five-star hotels across all of China, ADRs stood at +65 6415 7589 Ext 3589 RMB522, down 12.7% YoY, while RevPAR stood at RMB274, michael.roberts@savills. com.sg down 28.8% YoY in Q3/2020. Occupancy for five-star hotels “ China is one of the few declined 11.9 ppts YoY to 52.5% in Q3/2020. bright spots in the global Savills plc • Sanya proved to be a bright spot, with many metrics higher Savills is a leading global real hospitality industry. Despite estate service provider listed on in 2020 than in 2019, thanks in part to an expansion of the London Stock Exchange. The company established in 1855, has duty-free shopping in Hainan. In Q3/2020, Sanya’s ADR’s limited international visitor a rich heritage with unrivalled growth. It is a company that leads stood at RMB692.36, an improvement of 15.6% YoY, while its rather than follows, and now has numbers due to travel over 600 offices and associates RevPAR stood at RMB455, an increase of 28.6% YoY. Sanya throughout the Americas, Europe, occupancy also moved to 66%, an increase of 6.6 ppts YoY. Asia Pacific, Africa and the Middle restrictions, China is East. This report is for general informative purposes only. It may not be published, reproduced or • China’s domestic tourism market has largely recovered. benefitting from large quoted in part or in whole, nor may During Golden Week (Oct. 1 to Oct. 8), China saw 637 it be used as a basis for any domestic traveller demand contract, prospectus, agreement million trips made domestically, which generated RMB466 or other document without prior consent. Whilst every effort has bn in tourism revenue. This was approximately 79% of 2019 been made to ensure its accuracy, that is eager to explore its Savills accepts no liability levels (though the holiday in 2020 was one day longer). whatsoever for any direct or own backyard.” consequential loss arising from its use. The content is strictly copyright and reproduction of the JAMES MACDONALD, SAVILLS RESEARCH whole or part of it in any form is prohibited without written permission from Savills Research. savills.com.cn/research 1 Hotel MARKET OVERVIEW proved resilient as people spent more in their GRAPH 1: ADRs (4QMA) By City Tier, Q4/2015 to 2020 has not been kind to the global tourism home cities. Q3/2020 market, but China fared better than most. Tier 1 Tier 2 Tier 3 The beginning of the year was historically TRENDS 900 bad for the Chinese tourism market, but it Digitalisation 850 rebounded quickly and by the end of 2020 As much as is possible, hotels are moving stands near last year’s levels and, in some online and onto social media. Hotels are still 800 cases, even exceeds the numbers from 2019. ‘in-person’ businesses, but the COVID-19 750 At the end of 2020, China was practically the pandemic has forced operators to become 700 only bright spot for hoteliers around the globe. increasingly clever in their promotions and International travel in 2020 was virtually revenue streams. One aspect of this change is 650 non-existent, and COVID-19 cases surged in the increasing number of live streamers that RMB per day 600 many continues, strangling domestic tourism are cooperating with hotels in China. The live 550 markets. China also saw outbreaks pop up streamers, with large online followings, are in 2020, most notably in Beijing, Tianjin, utilising hotel’s luxury interior decorations 500 Qingdao, Shanghai, Chengdu, and other as a backdrop for their shows. For the hotels, 450 cities, but the government was able to quickly this helps bring attention to their properties Q1 Q1 Q1 Q1 Q1 Q2 Q2 Q2 Q2 Q2 Q3 Q3 Q3 Q3 Q3 Q4 Q4 Q4 Q4 Q4 lockdown and contain these outbreaks before in the hopes that viewers—who get a free 2015 2016 2017 2018 2019 2020 they severely affected the wider economy. ‘property tour’—will remember them when it Source China Ministry of Culture and Tourism; Savills Research Major hotels brands now must rely on their comes time to travel. Additionally, hotels are China operations to bring them forward into showcasing other aspects of their properties, 2021, with much of their worldwide operations notably the F&B facilities, to serve their stalled or shut completely. surrounding catchment areas; though they may not fill rooms, local populations can help In 2H/2020, China returned to some sense support other revenue streams for hotels if of normalcy in terms of domestic travel. The the properties are unique or instagrammable GRAPH 2: Occupancy Rates (4QMA) By City Tier, National Day holiday (Oct. 1st to 8th, and enough. Q4/2015 to Q3/2020 eight days compared to the normal seven) saw a rebound in the domestic tourism Outside of online promotional activities, Tier 1 Tier 2 Tier 3 75% market. According to the China Tourism hotels in China are also upgrading their on- 70% Academy (CTA), China saw 637 million trips site technological capabilities. In some major 65% (79% of 2019 numbers) and RMB466 billion hotels in China, visitors can go through the entire check-in process—from the lobby to 60% in tourism revenue generated across the their room—and never see hotel staff. A guest 55% country during the eight-day holiday. While can arrive at the lobby to scan a QR code to 50% still low compared to historical averages, check-in, leave their bags in the designated 45% these numbers reflected the improving area for the staff to deliver later, go to their 40% national economy and the returning travel and consumer sentiment. Tourism is not room and open the door with a QR code or 35% only important for the hospitality sector but electronic key. With COVID-19 effectively 30% also the broader economy. Over the course contained in the country, these measures 25% of the National Day holiday total retail and may not be necessary or cost-effective for 20% some hotels, but it provides an extra layer of Q1 Q1 Q1 Q1 Q1 restaurant sales for China reached RMB1.6 Q2 Q2 Q2 Q2 Q2 Q3 Q3 Q3 Q3 Q3 Q4 Q4 Q4 Q4 Q4 2015 2016 2017 2018 2019 2020 trillion, with daily sales up 4.9% compared to security and privacy for more cautious guests. 2019, according to the Ministry of Commerce. Source China Ministry of Culture and Tourism; Savills Research This indicates that even if many did not travel Flexibility during the holiday, consumption demand Flexibility in booking also proved to be GRAPH 3: RevPAR (4QMA) By City Tier, Q4/2015 to TABLE 1: Top Five Chinese Cities’ Five-star Hotel Metrics Ranked By ADR, Q3/2020 Q3/2020 Tier 1 Tier 2 Tier 3 700 ADR RevPAR Cities Occupancy rate (RMB) (RMB) 600 Beijing 773 32.1% 248 500 400 Shanghai 763 56.1% 428 RMB per day 300 Sanya 751 74.9% 562 200 Shenzhen 675 55.9% 378 100 Q1 Q1 Q1 Q1 Q1 Q2 Q2 Q2 Q2 Q2 Q3 Q3 Q3 Q3 Q3 Q4 Q4 Q4 Q4 Q4 Guangzhou 659 52.1% 334 2015 2016 2017 2018 2019 2020 Source China Ministry of Culture and Tourism; Savills Research Source China Ministry of Culture and Tourism; Savills Research savills.com.cn/research 2 Hotel a key concern for hoteliers and tourists 3.1%. These arrivals were almost exclusively GRAPH 4: Select First- And Second-Tier City throughout 2020. With the uncertainty domestic as international passport holder Metrics 12-Month Average Versus Previous Three of when and where a COVID-19 outbreak numbers slumped 87%. Additionally, Sanya Years, Q3/2020 might occur, travellers are now prioritizing boasted the strongest hotel metrics of any ADR Occ RevPAR flexibility and ease of room cancellations. city in the country in December 2020, with 0% Hotels, responding to market demand, occupancy reaching above 80% and RevPAR -5% offered free, short-notice cancellations to at RMB929, according to STR. -10% attract customers in a fierce market. This -15% was reflected throughout the year when INVESTMENTS -20% COVID-19 cases popped up in cities like COVID-19 had a massive impact the domestic -25% Beijing in June, Shanghai in November and tourism industry in 1H/2020 and continues -30% Chengdu in December, occupancy dropped to plague the market despite the improving -35% quickly. Now, many travellers and event fundamentals in the last half of the year. -40% planners are unwilling to book unless it is 2020 is a low point for hotel transactions in -45% easy for them to cancel their bookings and China, with just RMB8.15 bn trading hands, at a minimal cost. This has had a significant the lowest level since 2013. China fell behind -50% effect on hoteliers’ ability to plan and forecast Japan (RMB17.4 bn) and Korea (RMB8.19 Xi'an revenues and could well result in a wider bn), accounting for just 17% of Asia Pacific Tianjin Beijing Wuhan Ningbo Suzhou Xiamen Nanjing Qingdao Chengdu Shanghai market shift in hotel operations that last sales.