China’s hotel construction pipeline continues to expand despite economic slowdown

Analysts at Lodging Econometrics (LE) reported that at the end of the first half of 2019, China’s total construction pipeline swelled to 2,991 projects or 592,884 rooms, up 19% by projects and 7% by rooms year-over-year (YOY), both at all-time highs, amidst an economic slowdown. The China growth rate is expected to be 6.2% for 2019, the lowest reported since 1990.

The rocky economic climate is due to high debt levels, a trade war with the US and on-again, off-again discussions that add further to economic instability.

China has 2,174 projects or 407,594 rooms presently under construction, up 20% and 5% YOY, respectively, while projects scheduled to start construction in the next 12 months stand at 411 projects/84,555 rooms. Projects in the early planning stage stand at 406 projects or 100,735 rooms, up 19% by projects and 13% by rooms.

All stages of the China pipeline have project counts at all-time highs but not total rooms as the average size of pipeline projects have now dipped to 198 rooms per project, the smallest size that LE has ever recorded. The decline is primarily due to the long-term shift of projects from luxury and upper-upscale projects to the upper-upscale and upscale segments, a trend that has been visible since the mid-decade.

In the first half of 2019, China opened 413 new hotels/62,173 rooms with another 452 new hotels/69,110 rooms forecast to open by year-end. In 2020, 786 new hotels with 130,614 rooms are forecast to open. In 2021, new hotel openings are expected to reach 728 hotels with 135,913 rooms. Should all these hotels come online in 2021, then China will open the greatest number of new hotel rooms since the cyclical peak in 2014, the report added.

Guangzhou leads China’s pipeline with an all-time high project count of 140 projects with 27,945 rooms. Shanghai follows with 125 projects/23,361 rooms. Next is Chengdu at a record high 115 projects/24,328 rooms as does Wuhan with 91 projects/13,249 rooms. Suzhou follows with 88 projects/15,154 rooms.