China’s hotel room rates disappoint during ‘golden week’ despite tourism boom

Hotel room prices in China during the recent National Day "golden week" holiday fell short of expectations, despite a surge in tourism, according to industry executives. Despite a boom in bookings, rates remained largely unchanged from the previous month between October 1 and 7, as reported by officials from hotel operators and travel agencies.

Li Wenjie, CEO of Shanghai Yaheng International Travel, stated that the days when hotels could expect a significant revenue boost during the holiday are over, as middle-income tourists are less willing to spend freely on accommodation.

The subdued performance contrasts sharply with the steep price increases seen three years ago after Beijing lifted its zero-Covid-19 policy. During the 2023 holiday, some hotels raised rates as high as ten times their average levels. Qunar, an online travel agency, reported a 30 percent increase in hotel bookings in popular tourist destinations on the mainland compared to the previous year.

Experts attribute the softened demand to new hotel supply, corporate travel, and outbound tourism, which are putting downward pressure on room rates. Zhou Tao, head of hotels and hospitality at JLL in China, suggested that operators should adopt total-revenue management, price strategically around events and peak periods, and diversify into local, meetings, incentives, conferences, and exhibitions (MICE), and extended-stay demand.

Some Chinese hotels face challenges with outdated designs that no longer meet modern travelers' needs, according to Zhou.

Major hospitality groups like Hilton and Shangri-La have been focusing on lifestyle brands to cater to Chinese tourists' growing demand for personalized and culturally immersive experiences. Shangri-La recently launched its super-luxury hotel brand, Shangri-La Signatures, in China, offering unique experiences combining cultural heritage and nature. Hilton introduced its Tempo brand to China last year, aiming to capture demand for lifestyle-oriented hospitality through a scalable business model.

Herman Chui, senior director of office, hotel, and residence at Hong Kong developer Hang Lung Properties, emphasized that modern hotels should offer guests more personalized experiences, such as selecting in-room amenities and allowing pets. Professional asset management, including repositioning, rebranding, and renovation, is crucial for rejuvenating hotels and achieving better performance and asset value.

Despite these challenges, there is hope for the sector. Analysts point to events as a potential source of concentrated demand, which could give venue-adjacent hotels greater pricing power. The 25th China Shanghai International Arts Festival (CSIAF), a month-long cultural event featuring over 400 programs and 1,100 performances, is set to kick off in Shanghai on October 17, aiming to position the city as a premier global destination for the performing arts.