Home Hotel industry Beijing hotels see Olympic rate hike as other Chinese cities sputter

Beijing hotels see Olympic rate hike as other Chinese cities sputter

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Skift grip

A largely shuttered international sporting event in the Chinese capital means the historically unstable Olympic bump in hospitality is more likely to be an Olympic hit.

Cameron Sperance

The host city of the Winter Olympics this week is one of the few major markets in China with something to brag about when it comes to hotel performance.

Daily rates at hotels in Beijing were nearly double 2019 levels due to the ongoing Winter Olympics, according to STR’s most recent dataset that included the first full day of competition. This was in response to potential business from the media and anyone authorized to attend the largely closed sporting event who were not athletes staying in the Olympic Village.

The daily rate figure is still something to brag about, as hotel companies around the world have been able to accelerate their post-pandemic recovery by maintaining or charging higher rates as occupancy takes longer to build. rebuild. A recovery in rates following deep discounts usually aimed at stimulating demand is why the hospitality industry can take many years to fully rebound from an economic downturn.

It’s not yet time for the lap of honor: the occupancy rate, at 33%, was still low last week in Beijing. This was due to a combination of the Lunar New Year – when travelers typically head to more touristy and leisure-focused destinations like Sanya – as well as various lockdowns and restrictions in other parts of the country amid new spikes of cases.

The number of hotels with higher rates was also likely to be limited: only a limited number of hotels are in Beijing’s ‘closed-loop’ network for the games, allowing competition to continue. without exposing the rest of the city to the influx of international visitors. China remains largely closed to the rest of the world as part of its Covid-zero strategy.

“Beijing [hotels in the closed loop] probably got some kind of media shock,” said Patrick Scholes, managing director of experiential accommodation and leisure equity research at Truist Securities. “Historically, it was a nice bump but short-lived. This year is obviously an exception.

The bump also typically extends throughout the host country as visitors extend their trips and explore other cities and regions. But that won’t happen for the 2022 Winter Olympics as China maintains its strict mitigation tactics against the spread of the virus.

China’s domestic hotel revenue per available room, the industry’s key performance metric, was 48% below 2019 levels last week, STR reported. The continued decline in performance from pre-pandemic levels is largely due to parts of China being under varying degrees of travel restrictions.

It is the second Olympics in the pandemic to fall short of the levels of international tourism predicted when bids were first allocated.

Since Tokyo was first announced as the host city for the 2020 Summer Olympics in 2013, Tokyo has added 250 hotels, or just over 53,000 rooms, to its hotel supply, according to Lodging Econometrics. Japan expected tens of millions of international visitors to host the Olympic Games. Instead, tens of thousands of people were involved – largely all directly involved in the games due to Japan’s border restrictions.

The two sparsely attended Olympics are a hard lesson in why not build a hotel for a multi-week event. This usually doesn’t work well, even under the best of circumstances.

According to a study by the University of Delaware, Sydney’s hotel supply increased by nearly 12% before its turn in 2000 to host the Summer Olympics. Occupancy fell nearly 8% in the Australian city a year after the Olympic flame was extinguished, and revenue per room fell 30%. Daily rates have fallen by 24%.

Occupancy dropped more than 2% after the Vancouver 2010 Olympic Winter Games and remained stable two years later. Revenue per available room fell 4% the following year and almost 3% in 2012. Vancouver’s hotel supply increased by about 7% in the run-up to the Olympics.

“People want to go to the Olympics,” said Jan Freitag, national director of hospitality analytics at CoStar. “It’s just a matter of what happens next.”