Analysts at Lodging Econometrics (LE) reported that despite the COVID-19 outbreak, China’s total construction pipeline continues to expand to an all-time high of 3,533 projects with 645,764 rooms, up 24 percent by projects and 9 percent by rooms year over year.
China has 2,330 projects with 412,142 rooms under construction. Projects under construction remain 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 increase of 92 percent by projects and 45 percent by rooms year over year, to stand at a record-high 744 projects with 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 in 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. Over the next several quarters, many are expected to advance as the pipeline resumes construction. Meanwhile, projects in the early planning stage stand at 459 projects with 113,164 rooms and have also experienced double-digit increases, up 22 percent by projects and rooms, year over year.
In the first quarter of 2020, China opened an all-time low of 84 new hotels with 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.
Research by LE’s market intelligence team shows that 90 percent of the hotels in China reopened at the end of April, with hotel occupancies bouncing back. Additionally, at least 40 percent 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, a workforce, and are being pushed toward completion. Smaller contractors continue to struggle to finish projects due to the lack and increasing price of labor and construction materials available.
As a footnote, researchers noted that COVID-19 did not have a full impact on first-quarter 2020 China results reported by LE.
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