Major Chinese markets such as Sanya and Shanghai have shown rebound in hotel occupancy, thanks to resumption of domestic leisure and business travel, says JLL.

The broad lockdown due to the Covid-19 pandemic has immediately impacted the hotel sector in January. However, the impact of upscale hotels’ occupancies in Sanya was considerably lower than in Beijing and Shanghai. Hotel occupancy at upscale hotels in Sanya for June (61.2%) and July (78.6%) were higher than pre-Covid-19 occupancy levels.

Shanghai’s upscale hotels registered m-o-m increases since March, and accelerated in June, where it increased 37.2% m-o-m and in July, which registered a 55.3% increase m-o-m.

“Chinese travellers who previously vacationed internationally are now taking their holidays domestically, which has resulted in y-o-y growth in occupancies in select Chinese leisure markets,” says Ling Wei Tan, vice-president of investment sales (Greater China) at JLL’s Hotels & Hospitality Group. The pent-up demand has led to green shoots in 2Q2020, particularly in Sanya.

Despite short-term uncertainties arising from Covid-19, hotel transaction volumes in Shanghai totalled RMB 4.1 billion ($814.3 million) in 1H2020, an increase of 60% y-o-y. It offset a transaction volume decline in Beijing of over 80%. However, JLL believes that given the robust fundamentals of Beijing, investor interest is expected to remain strong and transaction activities are anticipated to bounce back in early 2021.

JLL projects that corporate distress may lead to asset sales in the near future. Assets that can bring stabilised or quick returns such as rental or serviced apartments and strata-sale properties will likely be preferred by investors. Additionally, there is a growing number of foreign funds pairing up with local partners to acquire hotel assets.