A word of advice for business travelers intending to visit Beijing this year: avoid the city Aug. 8-24, when the Chinese capital will host the 2008 Olympic Games. In spite of the fact that 11,000 new upscale hotel rooms will have opened since the beginning of 2007, Beijing is already almost fully sold out for the Games. What is more, the official rates set by the Chinese government during the Olympics will make it an expensive experience even if you can find somewhere to stay. A five-star room will cost US$383 per night and a four-star room $295.
The Olympics are expected to draw three million spectators to Beijing and other participating cities, but the irony is that if there is one country where travel is booming without the extra push of a major global event, it is China. “Since entering the World Trade Organization in 2001, contact with the outside world has grown exponentially, and so too has the domestic travel market – no fewer than 46 percent of guests at the mainland Chinese properties of Shangri-La Hotels and Resorts are from mainland China,� says Jerry Murck, senior vice president for hotel relations at BCD Travel.
As a result of the growth in internal and external travelers, the Chinese government says business travel trips to and within the country soared from 1.39 billion in 2006 to an estimated two billion in 2007. Small wonder that China is predicted to become the number one travel destination in the world by 2020.
Growing demand has led to fast-rising hotel rates as well. On average, rates are eight-ten percent higher this year than in 2007, according to Kent Zhu, vice-president for sales and marketing for Shangri-La, with the depreciation of the dollar making the price hike seem even greater for US travelers. In addition to the pressure caused by demand, Mr. Zhu says labor costs are also rising by eight percent to ten percent. “I think hotel rates will continue to increase by the same amount,� he says. “However, Beijing and Shanghai are still reasonably priced compared with other Asian cities like Singapore, while rates in secondary cities are only $100-$120 per night.�
Regarding Beijing, Mr. Zhu also expects rates to be higher than usual in the weeks leading up to the Olympics as the city will attract many tourists, sponsors and athletes long before the Games get under way. Mr. Zhu says there is still good availability both before and after August but he advises early booking, especially for meetings.
Previous Olympics have historically led to a visitor slump for the host city immediately afterwards, leading to a collapse in rate thanks to the newly built supply exceeding demand. Mr. Zhu does not think that will happen this time. “We might see a slight change in occupancy, but because of China’s economic growth, Beijing will absorb the new supply quite quickly,� he says. “Also, September and October are a very busy time for business meetings.�
Once the Olympics finish, there is no sign of hotel development in China slowing down. Around 300,000 new rooms are expected to open by the end of 2010. The largest foreign hotel company in the country is IHG, which owns brands such as Holiday Inn and Inter-Continental. China is already IHG’s third-largest market and it is destined to become second-largest in the next four years with 30,000 rooms in the pipeline to join the 23,000 rooms it already has there.
The numbers may sound huge but IHG points out that China has a population of 1.3 billion and 177 cities with more than one million inhabitants, compared with 49 in the US and only 36 in Europe. And with more international investment taking place across China, hotels in secondary cities have seen increased business traveler demand over the last three years. “There are more and more business travelers going to set up manufacturing facilities throughout China or visiting for procurement activities. The quality of hotel accommodation in China remains high and business travelers to key destinations have a large number of excellent hotels to choose from,� Mr. Zhu says.
China looks set to feature increasingly heavily in corporate travel programs – and not only the two big cities of Beijing and Shanghai.
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