Morgan_Stanley-China_Hotels_Industry_Supply_and_Opening_Location-112949027_14页_1mb

Morgan Stanley: China Hotel Industry 2025 Outlook Summary

Key Findings

1. Hotel Supply Growth: China's hotel supply increased significantly in 2023 (+16% YoY) and further by 11% YoY in 2024. This pushed the cumulative supply since reopening in 2023 to record highs, surpassing the pre-pandemic 2019 level by about 6%. Supply growth is expected to slow in 2025.
2. Branded vs. Independent Hotels: Brand penetration reached 29% by the end of 2024, stable despite the top four hotel chains accounting for about 9% of the market (Jin Jiang, Huazhu, BTG, Atour). Independent hotels grew at the same pace as the branded market overall. Non-headquartered brands (soft brands like Dossen and Elong) grew at the same pace as the top four brands in terms of new hotel additions.
3. Price Differences (RevPAR Mix): The blended RevPAR (including all hotels) of H World was less negative than that of Atour year-over-year. This difference is attributed factorially to:
   • H World's faster hotel growth rate (19% vs. Atour's 33%) and opening more mid-scale/upper mid-scale hotels.
   • Atour's strategic shift to lower-end ("Atour Light") hotels during expansion, compared to its previous upper mid-scale brand, combined with its lower base in higher-tier cities.
   • Both companies' lack of significant same-city expansion with detrimental pricing impact, and Atour having a slightly faster presence expansion in lower-tier cities, which negatively impacts pricing compared to Tier 1 cities.
4. City Tier Focus: Both major hotel groups are increasing their lower-tier city exposure. H World and Atour achieved net hotel additions across various city tiers in 2024.
5. B&B Market: Short-term accommodation (B&Bs/Ho) demand remains active, with an estimated annual urban floor area of 11 million square meters.
6. Local Market Dynamics: Some hotels (old existing buildings) in cities like Shanghai trade at lower RevPARs than new ones, suggesting successful repositioning or renovations command higher prices.

Outlook

• Supply growth is slowing due to deteriorating unit economics (RevPAR underperformance) in 2024.
• The competitive landscape remains tight, with both large chains and smaller/soft brands pursuing aggressive expansion, particularly in lower-tier cities.
• Differing business models and portfolio strategies between major chains lead to varied RevPAR outcomes and market positioning.