Hotel executives presented China as a definitive, massive growth opportunity to shareholders during the pandemic. But volatility in the development world as well as tough government oversight mean CEOs at companies like Hilton, Accor, and Wyndham need to find a new way to show strength.
The hotel industry’s go-to market for optimism and expansion narratives during the pandemic won’t offer such a rosy picture from this week’s earnings calls for companies like Hilton, Accor, and Wyndham.
China was supposed to be the global hotel industry’s V-shaped recovery market from the pandemic. Marriott anticipated a return to pre-pandemic performance there sometime this year. Hilton CEO Christopher Nassetta indicated earlier this year the company’s construction pipeline would likely center on Asia because of a cooling off in the U.S. lending market.
But stringent virus mitigation efforts zapping occupancy rates, a potential default by the country’s largest property developer, and even the risk of heightened regulation in the gaming region of Macau are major headwinds to western companies that have spent a bulk of the recovery labeling China as fertile soil for future hotel development.
“China is of great importance for all the major hotel players,” Gilda Perez-Alvarado, CEO of JLL Hotels & Hospitality, said in an interview with Skift. “However, with so much of the media focusing on the China Evergrande situation, hotel companies may opt to shift focus and let the storm go by.”
The major hotel companies are highly unlikely to just give up on China. It’s simply too lucrative and durable of a domestic travel market, similar to the U.S.
China was the first to post year-over-year hotel performance gains during the pandemic due to its containment measures and massive population of