Starwood is opening one hotel in China every two weeks, Hilton plans to go from 39 to 150 properties, and InterContinental is doubling its hotels in China to 400 over the next three to five years. Overcapacity or just fueling business need? From the Asian Review:
In the northeastern port city of Dalian, a Ritz-Carlton, a Grand Hyatt, a Langham and an MGM are all under construction. The Starwood group alone is preparing three hotels simultaneously. That is on top of a Shangri-La, a Conrad, a Hilton and a Furama already open and within walking distance of one another.
As per the Review, occupancy rates at luxury hotels in mainland China are significantly lower than in other countries. While the rates in Hong Kong and Singapore hover around 80% and break-even is said to be in the 70% range, China is falling well below that at a rate of 57.6% reported in May 2013. However, it’s important to note that hotel brands like Starwood and IHG reduce their risk by simply agreeing to manage the hotels without having to invest their own capital in the projects.
Check out the full article from the Review for some insight at to why it still might make sense from a brand recognition standpoint to grow in China despite these occupancy rates.