In the recent report by Lodging Econometrics (LE), in the third quarter of 2018, China’s total construction pipeline stands at 2,642 projects/569,690 rooms and is up 9% by projects and 6% by rooms year-over-year (YOY). Rooms in the construction pipeline are at an all-time high, and the pipeline is a mere 16 projects shy of the cyclical high of 2,658 projects set in the fourth quarter of 2014.
Projects presently under construction are at 1,928 projects/402,529 rooms, projects scheduled to start construction in the next 12 months are at 344 projects/73,209 rooms, and projects in the early planning stage are at 370 projects/93,952 rooms. Because of growing tensions about tariffs and near-term concerns about the economy, there is a notable urgency for developers with hotels already in the pipeline to move towards construction at a faster pace.
Through the third quarter of 2018, China has opened 446 hotels/78,091 rooms. The LE forecast for new hotel openings expects another 195 projects/27,054 rooms to open in the fourth quarter of 2018, bringing the anticipated new hotel openings to 641 projects/105,145 rooms by year-end. In the years ahead, 661 new hotel openings are forecast to open in 2019 and 604 in 2020. Both are distant from the cyclical peak of 1,684 new openings/193,772 rooms recorded in 2014.
Although the growth of China’s GDP has slowed in recent years, domestic tourism is still a driving force of China’s economy, which has been growing since 2013. Hotel demand is robust in tourism destinations and economically developed cities such as Beijing, Shanghai, Chengdu, and Shenzhen. Hotels in the China pipeline average a very high 215 rooms as the projects in upscale, upper midscale, and midscale chain scales are at cyclical peaks.
China’s total construction pipeline continues to be led by Shanghai and Guangzhou with 125 projects/24,403 rooms, and 113 projects/26,897 rooms, respectively. Guangzhou set an all-time high for rooms in the third quarter. Chengdu follows with 98 projects/21,895 rooms, Suzhou with 82 projects/14,640 rooms, and Hangzhou with 78 projects/17,046 rooms.
Franchise companies topping China’s construction pipeline are led by Hilton Worldwide, which has reached a new all-time high for the company, with 397 projects/88,689 rooms under development. Next is InterContinental Hotels Group (IHG) with 305 projects/71,935 rooms, and then Marriott International with 279 projects/77,087 rooms.
Hampton by Hilton is the fastest growing hotel brand in China. This is a result of the 2014 exclusive partnership of Hilton Worldwide with China’s Plateno Hotel Group to develop Hampton by Hilton in China. Since 2015, Hilton and Plateno Hotel Group have opened 47 Hampton by Hilton hotels and have further plans to continue rapid expansion across China with 194 of the 207 Hampton by Hilton projects in the pipeline set to be managed by Plateno.
Hilton’s second largest brand is DoubleTree with 66 projects/19,290 rooms. These two brands comprise 69% of Hilton’s total construction pipeline in China. IHG’s most prominent brands are Holiday Inn Express with 136 projects/25,628 rooms and Holiday Inn with 59 projects/15,961 rooms. Top brands for Marriott International are the full-service Marriott Hotel & Resort with 65 projects/20,064 rooms and Courtyard with 32 projects/8,363 rooms.