20151008-高盛-Look_for_reliable_growth_as_hotels_face_headwinds__Buy_China_Lodging,_Sell_Mandarin_37页_1mb

Summary of Hotel Market Analysis in Asia

Core Content

This document provides an in-depth analysis of the hotel market in Greater China and Hong Kong, focusing on the performance of key players and future outlook. The overall trend indicates weak demand and declining RevPAR (Revenue Per Available Room), with some positive signs emerging in certain segments, particularly in tier-1 cities.

Main Points

• Weak Demand and RevPAR Declines: Hotel demand across Greater China remains subdued, with high-end hotel RevPAR in China down 1% and in Hong Kong down 13% yoy. The decline has worsened in the second half of 2015.
• Green Shoots in Tier-1 Cities: China’s tier-1 cities show some improvement in high-end hotel RevPAR, with growth of 2% to 8% yoy. This is attributed to strong domestic travel demand and limited supply.
• RevPAR Cycle Outlook: The RevPAR cycle in Hong Kong is slowing, while in China it is likely bottoming out. The report suggests that the cycle is occupancy-led, with room rates following.
• Valuation and EBITDA Growth: Economy hotels are expected to deliver reliable EBITDA growth through new franchise and managed hotel openings. China Lodging is highlighted for its defensive exposure and aggressive expansion.
• Company Ratings and Target Prices:
  • China Lodging (HTHT) is upgraded to Buy due to its defensive exposure and growth potential.
  • Mandarin Oriental (MOIL.SI) is downgraded to Sell due to high exposure to Hong Kong and unattractive valuation.
  • Homeinns (HMIN) is downgraded to Neutral and HK & Shanghai Hotels (0045.HK) is upgraded to Neutral.
  • Shangri-La Asia (0069.HK) remains Neutral as its valuation is near the trough but room rate growth is still weak.
• Risks: Lower-than-expected RevPAR, currency volatility, and potential competition from the sharing economy are identified as key risks.

Key Information

• RevPAR Trends:
  • HK High-End: Down 13% yoy YTD, expected to remain weak in 2016.
  • China High-End: Down 1% yoy YTD, with occupancy stabilizing but room rates under pressure.
  • China Economy: Down 4% yoy YTD, with a potential slower decline in the second half of 2015.
• EBITDA Growth:
  • China Lodging is projected to achieve a 17% EBITDA CAGR from 2014 to 2017 due to strong franchise additions.
• Hotel Development Pipelines:
  • China Lodging has secured over 700 hotels for the next 12 months.
  • Homeinns has secured around 350 hotels, close to its full-year target of 400.
• Market Consolidation:
  • Major hotel chains are consolidating, which could improve pricing power.
  • The sharing economy may increase supply and pose a risk to the market.
• Leisure Travel Demand:
  • Leisure travel demand is expected to pick up, especially during the peak season.
  • The opening of Shanghai Disney Resort in 2016 is anticipated to boost hotel performance in Shanghai and surrounding areas.
• Valuation Ranges:
  • Economy hotel stocks and Shangri-La Asia are at the lower end of their historical valuations.
  • Valuation multiples for China Lodging and others are revised based on updated RevPAR assumptions.

Ratings and Target Prices

Investment Recommendations

• Buy: China Lodging (HTHT) for its strong EBITDA growth and defensive exposure.
• Sell: Mandarin Oriental (MOIL.SI) due to high exposure to Hong Kong and unattractive valuation.
• Neutral: Homeinns (HMIN), Shangri-La Asia (0069.HK), and HK & Shanghai Hotels (0045.HK) due to mixed performance and market conditions.

Conclusion

The hotel market in Greater China faces headwinds, particularly in high-end segments. However, economy hotels and tier-1 cities show signs of recovery. China Lodging is positioned for growth, while Mandarin Oriental is considered a sell due to its exposure to Hong Kong and valuation. The report emphasizes the importance of room rate growth and market consolidation in the future outlook.