Accor SA (AC) will build about a third of its 100 planned Chinese hotels in tourist destinations as rising wealth in the country leads to growing leisure travel and oversupply in cities depresses room tariffs.
Domestic tourism in the country is “growing at a rate of knots,” Michael Issenberg, chairman of Accor Asia-Pacific region, said in a May 22 interview in Sydney. That’s making tourist spots more attractive than many urban sites, he said.
“If people acquire wealth, they want to travel,” Issenberg said. “That’s been the big change. Even five years ago, it was all cities.”
Europe’s largest hotel operator has already opened sites on ski slopes near the North Korean border, a beach resort on tropical Hainan island, and a central Chinese forest park among its 128 hotels in the country. That’ll help it capitalize on domestic tourist trips that are forecast to grow by about 11 percent a year between 2013 and 2018, according to data from Euromonitor International.
Other international leisure companies are also targeting China’s domestic tourist market. Carnival Corp. (CCL:US) will dispatch a fourth cruise ship for the country next April and Walt Disney Co. (DIS:US) plans to open a $5.5 billion theme park resort in Shanghai during 2015.
Hennes & Mauritz AB (HMB), the Swedish fashion chain, has opened a store in Zhangjiajie, which serves central Hunan province’s scenic Wulingyuan national park. The town is also home to an Accor Pullman hotel.
China overtook Germany in 2012 to become the largest outbound tourism market, according to the United Nations World Tourism Organization. International spending by Chinese travelers rose 26 percent during 2013 to $129 billion, the agency said May 14.
Expansion by domestic and international companies in China has slowed some hotel operators’ ability to increase room rates.
At InterContinental Hotels Group (IHG) revenue per available room in Greater China rose just 0.7 percent from a year earlier in the third quarter of 2013, according to company filings.
Hotels in the densely populated east of China filled about 64 percent of rooms during April. That compares with occupancy rates of about 70 percent in Accor’s economy hotels globally and 68 percent in its upper- and mid-market locations during 2013, according to a company presentation in January.
“The oversupply can be chronic if things keep getting built, but if the supply even starts to moderate, demand will catch up,” Issenberg said. “If you ask anybody, ‘‘If you had more time or money what would you do?’’ almost everybody says travel.”
The chain is also building six new hotels in Myanmar amid rising foreign investment in the country, he said. A first site will open next month in the capital Naypidaw with others to follow in Yangon and the scenic Inle Lake.
Setting up credit-card payment networks, getting insurance and training workers in hygiene is still a challenge in a country that has little experience with tourism, he said.
Myanmar had about 36,177 tourist arrivals during August 2013, the most recent month for which data compiled by Bloomberg is available, compared with 2.4 million during the same month in neighboring Thailand.
“I went in December, and a hotel we were visiting had an ATM machine and was really excited” about it, Issenberg said referring to Myanmar. “That tells you the state of the country, that this is big news that you can actually get cash.”
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