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2024 is a turbulent year for china's high-end hotel industry. from the announcement of the closure of the beijing opposite house, to the closure of the once star hotel great wall hotel on the third ring road, to the listing of the famous french accor brand sofitel hotel near the second ring road for sale, all of them have attracted widespread attention. now the fire has spread to the wangfujing business district in the central city of beijing. among them, the legend hotel, which is located in an excellent location in the business district, has been listed for sale from last year to this year, and the nearby wangfu peninsula tianlun dynasty renaissance hotel has also appeared in the sale list.

"except for the hotels on sale in wangfujing business district, high-end hotels in chaoyang district are not popular this year. a large hotel in china world trade center is trying to find ways to 'reduce costs and increase efficiency'." an industry insider revealed to pincheng travel reporter.

in addition to beijing, chongqing baichun industrial company went bankrupt and liquidated, and its banyan tree assets were put up for public auction on september 2, but no one bid and the auction ended in failure. in addition, there are also reports of many high-end hotels being auctioned off in shanghai, jiangsu, hunan, hainan and other places... in the face of so many sales, can a simple "downward consumption" explain it?

01

is the business district economy failing?

the reason why the listing of the legendale hotel for sale in the wangfujing business district has attracted more attention than some similar situations in other places in the country, or even in other places in beijing, is probably related to the wangfujing business district's unparalleled glory since ancient times and the legendale hotel's great reputation.

wangfujing business district has been in the core position of beijing since at least the ming and qing dynasties. jinbao street is formed by the merger of several alleys such as suianbo hutong, and is located in the best location of wangfujing business district. as early as 1998, beijing went to hong kong to attract investment, which was a key project at that time. this project was eventually won by hong kong fuhua international group, which owns many top commercial real estate projects in beijing, such as the beijing hong kong jockey club club, and jointly built the legendale hotel with important enterprises in macau.

the legendale hotel is located at the southeast corner of jinbao street, across the street from important buildings such as the china international travel service building. the exterior has a strong southern european decorative style, and the structure is full of neoclassical intentions. it has 17 floors above ground and 3 floors underground, with a total construction area of ​​89,949 square meters, 390 guest rooms and 79 serviced apartments.

since its opening, the hotel has received dignitaries and celebrities from all over the world, including 22 heads of state and dignitaries from 56 countries. the hotel was awarded the qualification of the designated official reception hotel for the beijing olympic games and has undertaken the reception work for heads of state and distinguished guests attending the beijing olympics. a netizen said: i stayed here for the first time when i accompanied my leader on a business trip. i was shocked at the time. i felt that the hotel's design was very high-level and the service was very thoughtful.

but now this hotel, located in the core area of ​​wangfujing business district, has been put up for sale for the second time, which inevitably makes people wonder and worry: is it because the business environment in beijing's core business district is not doing well? or is it because this high-end hotel is not doing well? or is there another reason?

fu gangye, chairman of beijing sino-swiss excellence management consulting co., ltd., believes that the case of the legendale hotel in wangfujing business district needs to be analyzed in detail, because the hotel and the business district are relatively special, and it is not appropriate to generalize it with other similar situations in the country. at the same time, it is not recommended to simply attribute the sale of high-end hotels to the development and decline of the business districts to which they belong.

he said: "legend hotel has always been influential in high-end hotels in beijing and even in china. the hotel is the first major project invested by macau enterprises and hong kong capital in the mainland, and has been developing well under the long-term management of senior professionals in the industry. it is put up for sale, which should be an isolated case. it has something to do with the impact of the current market environment on the hotel, but more importantly, it has a greater relationship with the corresponding decision of the owner, and has relatively little to do with the wangfujing business district."

according to public information released by relevant departments of beijing, in the past four years since 2021, wangfujing business district has introduced a total of 153 first stores, flagship stores and innovative concept stores, and the first store effect has been obvious. many major commercial entities have been transformed and renovated and reopened. in the first half of 2024, the passenger flow in wangfujing area reached 59.3 million, a year-on-year increase of 36%.

fu gangye said that the old consumption model of wangfujing business district, which is dominated by traditional large shopping malls, and the new consumption model, which is dominated by first stores, are growing and declining. the business district has always been located in a key position in the core business map of beijing, and this fundamental factor has always existed. its transformation and development is relatively successful compared with traditional business districts in beijing and other parts of the country. there is no need to make a big judgment on the overall judgment of wangfujing business district by exaggerating the sale of legend hotel. generally speaking, most business districts in china will have a greater impact on the business of economy and even mid-range hotels within their scope, but the impact on high-end hotels, especially high-end hotels with unique backgrounds and styles like legend hotel, is relatively small.

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02

is the domestic high-end hotel market failing?

recently, many high-end hotels in the industry have been put up for sale. what happened to the domestic high-end hotel market? is it over?

zhao huanyan, a senior economist in the hotel industry, pointed out that the oversupply of high-end full-service hotels in china is becoming increasingly prominent. according to the statistics of maidian research institute, in june this year, the opening of domestic luxury hotels increased by 500% month-on-month, and the signing of contracts increased by 200% month-on-month. liang tao, senior vice president of jll greater china hotel and tourism real estate division, also mentioned in an interview with the media that china's hotel industry is shifting from an incremental market to a stock market.

in august this year, major international hotel groups such as marriott, hilton, intercontinental, accor, and wyndham successively announced their second quarter 2024 financial reports, but the data showed that the performance of the chinese market did not meet expectations. it is reported that christopher j. nassetta, ceo of hilton group, said in a financial report conference call: "it will take time for the chinese market to recover. but overall, it is not a collapse but a weakness."

overall, as the global economy enters a downward cycle, high-end hotels will face various challenges, especially on the consumer side, where consumer confidence in the high-end hotel market needs to be further established.

xin tao, secretary general of the china tourism hotel association, believes that in the economic downturn, all types of hotels are facing market challenges, but we cannot say that "the market is not doing well" just because some people are selling. from the perspective of owners' needs, some hotels with good operating conditions will also be sold because owners are increasingly considering the issue of return on investment. this is an asset-level issue and has nothing to do with operations.

some industry insiders said that since the opening of legend hotel in 2008, the occupancy rate has been acceptable most of the time, and it has always maintained a high level of quality and market reputation. even though the staff are a little demoralized after the news of the listing, the performance is still strong. according to internal sources, its revenue last year still created the best record since its opening. recently, the beijing qianmen mandarin oriental hotel finally posted its room rate of 15,000 yuan per night, and it quickly became a hot search. this mandarin oriental not only broke the record of the most expensive hotel in beijing, but also immediately became the first on the "must stay" wish list of many mandarin oriental brand fans.

fu gangye believes that high-end hotels are different from economy and mid-range hotels. they are usually not short-term investment projects, but require high investment in the early stage and asset management rooted in long-termism in the later stage. their business life cycle is very long. however, the capacity of china's high-end hotel market is still limited after all. overall, the current stock market of high-end hotels in china is still large. in a foreseeable long period of time, a relatively cruel competition of survival of the fittest will continue. therefore, high-end hotels are constantly being put up for sale, which is a normal business phenomenon. it's just that high-end hotels are usually iconic to the business district or even the region they belong to, so their sale will attract more attention.

he said that in the long market adjustment process of "blowing away the yellow sand to find gold" in this high-end hotel market, for those high-end hotels with superior geographical locations in the core business district, scientific project establishment, reasonable planning and construction, and long-term good overall hardware and software levels, whether they have been open for a long time or are about to be launched, they will always have good investment value. because truly good high-end hotels will never lack fans. although their asset valuations will fluctuate under the changes in the external environment and at different stages of their own life cycle, and there will even be frequent changes of owners, there is no need to be blindly anxious. however, it is another matter for the so-called "high-end hotels" that lack professional standards in project establishment, site selection, construction, and operation, but just spend a lot of money to build a hotel that has little market development potential, or just hang a high-end hotel brand. after all, when the tide recedes, it is the most difficult to fill the numbers.

therefore, we need to analyze the high-end hotels that are put up for sale in detail. some are put up for sale because of their high comprehensive value and can be sold at a high price to save the day. some are put up for sale because they cannot afford to waste time and have to sell. not all high-end hotels that are put up for sale are doomed.

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03

are the owners of high-end hotels in trouble?

the falling listing prices of high-end hotels are also a cause for concern.

it is reported that the price of the legendale hotel beijing was 3.7 billion last year, but it failed to sell. this time, the price was reduced to 3.3 billion yuan. the nearby royal peninsula tianlun dynasty renaissance hotel is currently listed for sale at about 1.8 billion yuan. the starting price of the asset package of chongqing baichun industrial company (including movable property, immovable property and construction projects) including chongqing banyan tree hotel is only 700 million yuan. compared with the 2 billion or 3 billion yuan listed prices in the market in the past two years, this starting price is indeed surprising.

secretary-general xin tao said: "first, who will take over, second, at what price, and third, in what form are all considerations for both buyers and sellers, because the future operation and management team will also be involved after the takeover. at present, everyone is considering more about funds. after all, high-star hotels are definitely heavy assets, and the needs of owners are also different."

specifically, for owners, in the current environment, whether they need to put their high-end hotels up for sale will depend on the hotel’s current life cycle stage and its current profitability, but what needs to be considered more is the hotel’s asset management level and changes in the owner’s own overall strength.

fu gangye believes that high-end hotels that have been in decline for a long time or have been losing money for a long time will naturally not be sold at a good value when the market is not good. from the perspective of asset management, it can be said that they have missed the good time to put them up for sale. looking specifically at the high-end hotels that are being put up for sale, you will find that they have their own internal rules. the first common situation is that if the owner originally invested in the construction of this hotel, it was originally intended to be a must-commit supporting project or a means of attracting value-added for related real estate projects or commercial complexes. after these initial purposes have been achieved, it is of course understandable for the owner to decide to put the hotel up for sale and realize cash. this normal business decision of the owner is of course understandable. the second situation is that the overall strength of the owner has changed, for example, some have to withdraw from some fields. some of them are currently engaged in major changes in their main business. for example, many real estate companies have been struggling in recent years, and the owners are eager to transform, and some even have major problems with capital turnover. at this time, the valuable assets under their names that can truly have a certain ability to quickly realize cash are precisely high-end hotels, so "the beautiful girl gets married first" to sacrifice the car to save the coach and solve the urgent problem. it is also normal for the owner to make such a business decision.

will the domestic high-end hotel market still be healthy in the future?

in the 40 years of reform and opening up, the hotel industry has experienced two major developments. the first was driven by the government to develop the tourism industry and solve the problem of insufficient supply of chinese hotels. the second stage was a stage of major development driven by real estate. in this stage of development, the characteristics of domestic economic development were reflected: high-star hotels became an important "supporting" to increase land prices. however, no matter what kind of demand, it has caused the current situation of oversupply in the market.

"what problems will arise in a market with oversupply? it is very fragile. most high-end hotels are designed with business reception, conferences and exhibitions as their main customer groups. when the business market and the conference and exhibition market shrink, many problems will arise. we need to break the single market of the past and continue to innovate while ensuring the original quality." xin tao said.

at present, high-end hotels have made certain explorations in digital operations and increasing the proportion of catering.

as for the investment market, fu gangye believes that: it is expected that from now to the next three to four years, in the domestic high-end hotel sector, whether it is hotels, owners, or managers, they will face further market differentiation and volatile adjustments.

for many high-end hotels, some of them have been eugenics, and their hardware and software have remained in good condition so far, and they can seize the new consumption trend. they will still have unique asset value and will continue to develop against the trend. another part of them may not be suitable for project establishment or improper location selection, which is basically "born with illness", and the capital cost is abnormally high during construction and operation, which will further fall into trouble; some "high-end hotels" that have long been out of touch with reality due to disrepair, overall poor hardware and software status, or long-term poor operation will either downgrade and withdraw from the high-end hotel camp to survive, or close down, or even stop business, and eventually switch to other uses. there are also some that have a good foundation, but their facilities and decoration style are outdated, or their management is poor, or their performance has declined due to the overall environment. they will take advantage of the oscillation adjustment such as transformation, replacement of personnel or change of brand, and gradually recover to a suitable state before starting again.

for most owners, the decision to be made is whether to continue to hold the high-end hotels under their names or to resell them. no matter which decision is made, it should be based on professional evaluation and scientific analysis. if you are not sure about the industry development trend and hotel development, it is best to hire a third-party agency to help make rational decisions instead of blindly following market sentiment. if the owner's overall strength is not hindered and there is no urgency to deal with the high-end hotel assets under his name as soon as possible, he needs to work closely with the management to promote the hotel to actively respond to challenges and continuously improve performance. if you want to resell, you should leave the market at a reasonable transaction price as much as possible.

of course, as some people leave, others will come in. as the external economic environment and consumption trends undergo major changes, some investors from other industries or regions will choose to become new owners based on their own circumstances. this will undoubtedly help accelerate the further optimization of the high-end hotel owner group.

in summary, the domestic high-end hotel market currently has both risks and opportunities, and the situation of specific high-end hotels requires specific analysis.

fu gangye concluded: "in the past two or three decades, the development of china's high-end hotel sector has been somewhat 'suspended' as a whole. because it had to meet the needs of foreign tourism reception, or become a certain symbol or symbol, or the needs of an abnormal political and business environment at a certain time, it even developed earlier and faster than economy and mid-range hotels, which have a broader local market support. with the changes in the overall environment and the continuous development of china's economy, the high-end hotel sector will develop more reasonably and healthier overall after this round of market differentiation and shock adjustments. everything that cannot defeat the high-end hotel sector will eventually make us stronger."