beyondbrics

If there’s a general rule to doing business in the world’s most populous country, it’s that every rule has its exceptions, even those of supply and demand.

As beyondbrics reported earlier this month, luxury hotels in Shanghai, Beijing and other Chinese cities are feeling the fallout from rapid proliferation, with operating profits plunging as openings outpace demand, while announcements of new projects show no slackening.

Yet in Sanya, China’s southernmost city, the opposite dynamic appears to be at work. Continue reading »

Talk about a post-Olympic hangover. Every hotelier wanted to cash in on what was expected to be a boom in visits to the Chinese capital with the 2008 Games. Security worries however kept the crowds from heaving, and now the city’s stuck with more fancy digs than in knows what to do with – and more hotels are still going up.

The result is a predictable plunge in profit. The 2010 China Hotel Industry Study to be published this month by consultants Horwath HTL in conjunction with the China Tourist Hotel Association shows that gross operating profits at five-star hotels in China have fallen to an eight-year low. The study puts profits per room at Rmb91,752 ($13,535) in 2009, 39 per cent below the peak level reached in 2005 and the fourth straight year the figure has declined. The comparable figure for Hong Kong was HK$331,393 ($42,518).

“Quite clearly, the continued decline that we have witnessed in hotel profitability in China over the last few years can be attributed to the oversupply that we see in many markets across the country,” said Julie Dai, a Horwath director in Beijing. Continue reading »