While China has become the leading tourism market worldwide, Shanghai's tourism industry is benefiting from dynamic domestic tourism. Under the international spotlight during the World Expo 2010, the "Queen of the Orient" is enjoying the renown it has acquired and undertaking extensive projects on both business and leisure segments, such as the construction of a Disney Park, which will drive the hotel industry of tomorrow. But the megalopolis's ambitions do not stop there... it has presented its candidature for the organization of the Olympic Games in 2028.
Shanghai, at the heart of the leading global tourist market
As the leading economic power worldwide, China is also the leading tourism supply market worldwide with more than 1.3 billion inhabitants. In 2014, more than 3.8 billion tourists visited the different sites of the Middle Empire, spending some 3,880 billion yuans (close to 551 billion dollars) in the country, according to data published by the National Tourism Administration of the People's Republic of China. Sector revenues thus grew by 14.7% over those registered in 2013. The domestic market represents an important share of these results, driven by the increase in the population's revenues and standard of living. During the last decade, domestic tourism in China experienced steady growth by more than 10% per year and now accounts for more than 4% in the GDP of the country. With 1.3 billion potential clients, the volumes of travelers are able to reach impressive levels, particularly during peak periods that are the two so-called golden weeks, or the two weeks of vacation given yearly by the government for the Spring Festival and the National Holiday. The international market, meanwhile, represented more than 128 million tourists in 2014, 55 million of which spent at least one night in China. International arrivals in China were thus down slightly with the country suffering from an image problem on a global scale, due in part to the high levels of pollution, sanitary problems in the agro food industry and corruption. Incoming tourism revenues have, nonetheless, increased by close to 10% over 2013, to surpass 56 billion dollars. In the future, tourism demand in the country should not weaken, and the World Tourism Organization (WTO) is counting on an increase by 43 million in the number of international tourists in China, which should come close to 1.8 billion in 2030.
Shanghai is found in the midst of this tourism empire, of which it is the second most visited city after Beijing and ahead of Xian, Guilin, Hangzhou and Sanya. The city successfully took advantage of its title of organizer of the World Expo 2010, which was reputed to be the biggest ever in terms of number of countries present (190 and 42 international organizations), visitors (73 million, of which 5.8% from abroad) and surface area (523 hectares). Thanks to economic windfall from the event, Shanghai set a goal to become a global tourist destination and to increase sector-related revenues by 70%. This figures was already 305.3 billion yuans in 2010 (close to 44.6 billion euros), thanks to the increase in its national and international arrivals. While the domestic market already represented 260 million visitors in 2013 (a 3.6% increase over the previous year), 7.9 million international tourists visited the city in 2014, or 4.5% more than in 2013. Primarily from Japan, Korea, the Philippines and Singapore, the latter realized 6.3 million hotel stays, a figure up 4.16% over the previous year. Nonetheless, much remains to be done for Shanghai to reach its goal of 10 million international visitors per year in 2015, or at least come close, so that tourism weighs in at 8.5% of its GDP.
Develop the offer to attract more tourists
In order to attract more visitors, Shanghai's authorities launched major projects to diversify the tourism supply in the city, and several of these are nearing completion. The municipal government has in fact invested more than 40 billion yuans in the development of new infrastructures, particularly for leisure with the construction of the Shanghai Disney Resort Park. Scheduled to open in 2016, it will be the biggest Disneyland park in the world and will have two or three hotels for a total of 1,220 rooms. The installation should seriously boost tourist demand in the city in a sustainable manner. More recently, the metropolis announced the construction of the Shanghai Haicheng Ocean Park in the neighborhood of Pudong, on a 30 hectare site. The future theme park will have 12 exhibition halls, four aquariums, three cinemas dedicated to special effects, as well as other leisure infrastructures.
In addition to leisure equipment, Shanghai is focusing on business and events tourism. After seeing the economic impact of World Expo 2010 on the city, municipal authorities made the organization of international events an important development axis for tourism. In 2013, 72 meetings of international organizations were organized in the city, which is eight more than in 2013. Shanghai thus climbed to 29th in the ranking of the International Congress and Conventions Association (ICCA), up eight rungs over the previous year. The city hopes to climb even higher in the years to come, and entered the race to win the organization of the Olympic Games in 2028. If it wins, hosting such an event will have a major impact on the city, with regard to international influence as well as its arrivals and touristic renown.
The hotel industry is developing on the upscale market
Shanghai is one of the most important hotel markets in China. The city has strengthened this position after strong growth in its hotel supply for World Expo 2010, which saturated the market for the years after the event. The surplus supply has since been absorbed by demand which has continued to grow in recent years, and the market has regained a balance, according to data published by the tourism authorities of Shanghai for the past year. The city's hotel industry was able to improve its indexes thanks to growth in demand, especially within a country where the demographic advantage is undeniable. In 2014, the 3.5 point increase in occupancy rate, combined with the 3.5% increase in the average daily rate allowed for growth in Revenue per available room (RevPAR) for hoteliers. The latter, whose business was previously affected by the economic crisis, are more confident today with regard to their outlook, particularly with the forthcoming opening of Shanghai Disney Resort and the completion of the city's other tourist projects.
Today, like China overall, Shanghai attracts international hotel groups, which hope to establish their brands in one of the key destinations of the leading tourism market worldwide. They must nonetheless face the growing presence of local actors that has become formidable, particularly on the economy and midscale segments. Rather than compete with them, most players have decided to make them allies in order to develop on the market. Hilton, Accor, Choice Hotels, NH Hotels Group and Melià Hotels International, among others, all preferred to enter into partnerships with local actors to develop their brands in China, and thus in Shanghai. "As far as China is concerned, we made an important and irreversible decision by entering a partnership with Huazhu. We are aware that the economy and midscale segments on the Chinese market are in the hands of local players, who will develop our brands better than we could. I believe there will be a real consolidation between the four local players in China in the years to come," declared Sébastien Bazin, President and CEO Accor at the last edition of Global Lodging Forum.
While growth on the economy and midscale segments are mostly in the hands of local groups, there are opportunities to be seized in the upscale and luxury segments, whereas Shanghai's market is growing significantly on these segments. Starwood Hotels & Resorts International thus plans to establish its brand W in the city with the W Shanghai, scheduled to open in January 2017. Before that, the group will unveil its Sheraton Jiading Hotel (345 rooms) in June 2015, the sixth hotel by the brand in the city. Meanwhile, although Accor has entrusted the development of its economy brands in China to its new partner Huazhu, it has also announced the opening of a new Sofitel in Shanghai for the year 2016: Sofitel Shanghai Jing'an Huamin with 503 rooms and 77 suites.
Other spectacular projects are also being developed on the marketplace. Bulgari Hotels & Resorts, the joint-venture between the Italian luxury jewelry brand and the hotel group Marriott International, has, for example signed with the group OCT for a 120-room luxury hotel. It should open its doors in 2016 at Suhe Creek. IHG, meanwhile, is about to take over management of an astonishing hotel project through its brand InterContinental Hotels & Resorts. Developed by Shimao Property Group, the Shimao Wonderland Intercontinental will be a 400-room hotel built within a quarry filled with water near Songjiang. The cost of realizing this architectural exploit: 550 million dollars. Finally, a five-star hotel with 258 rooms should open its doors within the Shanghai Tower in the business district of Pudong, by the year 2016. Standing 632 meters tall (128 floors) it will be the tallest skyscraper in the city and second tallest in the world after the Burj Khalifa in Dubai. Called the Shanghai J-Hotel, the property will be operated by Jing Jiang International Hotels.
While extensive projects are under development in the city of Shanghai, in terms of leisure infrastructures and hotels, the city's tourist activity should not fall off in the years ahead. The Queen of the East should continue to seduce Asian and Western clientele alike, and to an even greater extent if its candidacy as organizer of the Olympic Games 2028 is retained.
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