China hotels sector well-positioned for recovery, asset transaction activities anticipated to bounce back in early 2021
Hotel transaction volumes in Shanghai totalled RMB 4.1 billion in the first six months of 2020
Shanghai, 8 September 2020 - Prospects for the China hotel market remain positive with the sector showing signs that it is relatively well-positioned to recover from the COVID-19 pandemic. According to JLL’s latest Hotels Recovery Guide, major Chinese markets such as Sanya and Shanghai have already recorded a meaningful rebound in hotel occupancy owing to the resumption of both domestic leisure and business travel. JLL expects Chinese domestic demand in the near-term to be further supported by constraints on international leisure travel.
Hotel occupancy at upscale hotels in Sanya for July (78.6%) 2020 were higher than pre-COVID-19 occupancy levels. Month-on-month occupancy Shanghai upscale hotels were registering continuous occupancy increases since March and accelerating in July (55.3%). “China saw a more pronounced decline in hotel occupancy in the earlier parts of the first half. However, in the second quarter of the year, green shoots began to emerge, particularly in Sanya, with pent up travel demand driving the resumption of a domestic-led leisure travel, providing owners and investors with a sense of optimism heading into 2021,” says Ling Wei Tan, Vice President, Investment Sales, Greater China, JLL’s Hotels & Hospitality Group. “As international travel remains constrained, Chinese travellers who previously vacationed internationally are now taking their holidays domestically, which has resulted in the unique outcome of select Chinese leisure markets recording year-on-year growth in occupancies.”
According to JLL, mainland China was the second most active hotel transaction market in Asia Pacific in 2019, recording RMB 14.3bn in transaction volume, or around 15% of the total hotel regional volume. Following on from robust 2019 activity, investors continued to display confidence in the Shanghai market in the first half of 2020. Despite short-term uncertainties arising from COVID-19, hotel transaction volumes in Shanghai totalled RMB 4.1 billion in the first six months of 2020, representing a nearly a 60% year-on-year increase and offsetting a transaction volume decline in Beijing of over 80%. However, given the robust fundamentals of Beijing, investor interest is expected to remain strong and transaction activities are anticipated to bounce back in early 2021.
JLL predicts the following themes across China hotel market:
- Serviced apartments, conversation and strata outperform: Assets that can bring stabilised or quick returns such as rental apartments, serviced apartments, or properties with conversion or strata-sale potential, will likely be preferred by investors looking at Mainland China opportunities.
- Foreign funds expand Mainland push: Domestic players will continue to dominate Mainland China hotel transactions market, but there is a growing number of foreign funds pairing up with local partners to acquire hotel assets and execute conversion and localisation plans.
- Staycation market to drive near term recovery: Market recovery is expected to be mainly driven by domestic leisure demand in the near term, mainly from staycations, and small meetings and events. We expect the luxury and upper-upscale hotel segments to show more resiliency due to their attractiveness as a staycation destination.
JLL’s Hotels Recovery Guide further identifies several strategic asset management initiatives that will likely gather pace as the market recovers into 2021. “Hotel operators and investors are now faced with a new operating environment to analyze market and consumer trends. In China, the dynamics of domestic travel have changed, and the wants, needs and consumer spending patterns have subsequently changed with it. Hotels will need to adapt to this reimagined reality to meet the experiential and health and safety demands of guests and consumers,” says Angel Chen, Vice President, Strategic Advisory and Asset Management, Greater China, JLL Hotels & Hospitality Group.
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JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $18.0 billion in 2019, operations in over 80 countries and a global workforce of nearly 93,000 as of June 30, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.