PORTSMOUTH, NH—Analysts at Lodging Econometrics (LE) report that despite the COVID-19 outbreak, China’s total construction pipeline expanded to an all-time high of 3,533 projects/645,764 rooms, up 24% by projects and 9% by rooms year-over-year (YOY).
China has 2,330 projects/412,142 rooms presently under construction. Projects under construction remained near record highs at the end of the first quarter even though many projects are delayed two to four months. Projects scheduled to start construction in the next 12 months experienced an enormous increase of 92% by projects and 45% by rooms YOY, to stand at a record-high 744 projects/120,458 rooms. These record counts can be attributed to the delay and pushback of new-construction starts caused by COVID-19 and also to the large number of new midscale projects that have been announced into the pipeline.
Between the second and fourth quarters of 2019, international brands as well as local franchise companies began focusing on developing the midscale segment to meet the demands of both business and leisure travelers. Many of these typically fast-moving projects were stalled in the middle stage of the pipeline. These factors have caused the number of projects starting in the next 12 months to swell tremendously. Over the next several quarters, many of these projects are expected to advance as the pipeline resumes construction. Meanwhile, projects in the early planning stage stand at 459 projects/113,164 rooms and have also experienced double-digit increases, up 22% by projects and rooms, YOY.
In the first quarter of 2020, China opened an all-time low of 84 new hotels/13,283 rooms. This is largely due to the delays in construction caused by COVID-19 and the nationwide lockdown. China’s pipeline had the longest stretch of days affected by COVID-19 in the first quarter.
Guangzhou leads China’s pipeline with 131 projects/26,412 rooms. Chengdu follows with 129 projects/26,904 rooms. Next is Shanghai at 119 projects/22,660 rooms. Then, Wuhan with 109 projects/14,877 rooms and Xi’an with 91 projects/16,180 rooms.
Franchise companies topping China’s construction pipeline are Hilton with 504 projects/102,495 rooms, InterContinental Hotels Group (IHG) with 384 projects/82,496 rooms, and Marriott International with 340 projects/93,254 rooms, all three companies setting record highs. Next is JinJiang Holdings, with 313 projects/31,401 rooms and Accor with 213 projects/35,309 rooms.
The pipeline’s brands are dominated by Hampton by Hilton at an all-time high with 309 projects/47,941 rooms. Hilton’s second-largest brand is DoubleTree with 62 projects/17,195 rooms. IHG’s primary brand in China is Holiday Inn Express, at a record count with 186 projects/32,038 rooms and then Holiday Inn with 60 projects/14,904 rooms. Marriott International’s top brands are the Marriott Hotels & Resorts with 77 projects/23,229 rooms and Fairfield Inn with 42 projects/6,352 rooms. Leading brands for JinJiang Holdings are Vienna Hotel with 130 projects/12,700 rooms, and 7 Days Inn with 110 projects/8,656 rooms. Accor’s leading brands are the Ibis brands with 90 projects/9,315 rooms, and Mercure Hotel, at an all-time high, with 61 projects/9,835 rooms.
Research by LE’s market intelligence team shows that 90% of the hotels in China reopened at the end of April, with hotel occupancies bouncing back. Additionally, at least 40% of hotel construction projects in major cities have resumed, with most projects estimating a delay of only two to four months. City and state-level projects are receiving the highest priority to receive materials and a workforce, and are being pushed toward completion. Smaller contractors continue to struggle to finish projects due to the lack of and an increasing price of labor and construction materials available.
COVID-19 did not have a full impact on first-quarter 2020 China results reported by LE. LE’s market intelligence department has and will continue to gather the necessary global intelligence on the supply side of the lodging industry. It is still early to predict the full impact of the outbreak on the lodging industry.