Another Bubble?

Spa in Hilton Shanghai

The expansion in China of hotel chains including Hilton Worldwide and Hyatt Hotels Corp. (H) may be undermined by low demand as four in 10 rooms sit empty.

China’s Low Hotel Occupancy Rates Threaten Expansion by Hilton, Starwood

By Bloomberg News – Nov 16, 2011

China’s occupancy rate was 61 percent in the first nine months of this year, the same as the year-earlier period and the lowest in Asia afterIndia among 15 countries tracked by STR Global, a consulting and research group. In Shanghai, only about half of hotel rooms were filled, compared with more than 80 percent for Singapore and Hong Kong, it said.

The world’s biggest chains have been rushing into China, which overtook Spain last year to become the world’s third-most- visited travel destination after France and the United States, based on United Nations World Tourism Organization data. The number of internationally branded hotel rooms is expected to surge 52 percent by 2013 after rising 62 percent in the past five years, according to Jones Lang LaSalle Hotels, which tracks data in 30 Chinese cities.

“Hotels in some markets of China are clearly oversupplied in the next three to five years, and they won’t be generating good returns,” said Nigel Summers, Hong Kong-based director at Horwath Asia Pacific, which tracks the hospitality industry. “China has had a very strong demand. The question is whether the increase in demand is going to be big enough to handle all the new hotels.”

‘Short-Term Bubbles’

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