Shanghai hotels rise out of the Expo dust

For the Shanghai hotel community -- and anyone living in the city for that matter -- 2010 was the year to stand up and be counted. 

In the wake of the Shanghai 2010 Expo -- the country’s longest-standing house party at 184 days with over 73 million on the guest list -- and a massive transportation upgrade, Shanghai and its hotels have officially made their mark on the world stage.

But now is hardly the time to rest on our laurels.

• More on CNNGo: Ultimate indulgence travel for 2011

The pre-Expo construction of nearly 6,000 new hotel rooms and the non-stop stream of visitors were welcomed after several hard-hit years. 

But as occupancy numbers and rates begin to creep back down with seemingly no property immune to the crunch, many smaller, budget hotels are slated for imminent closing, while bigger brands, in it for the long-haul, must choose between flourish or fold. 

Although a seemingly grey future awaits some Shanghai hotel properties in 2011, a pragmatic, yet optimistic stance appears prevalent among the city’s hotel leaders for the coming year.

1. Embracing change

Ups and downs are far from news, and simply part of a natural hotel cycle, notes Martijn van der Valk, general manager of The Puli Hotel and Spa Shanghai, who sees Shanghai as a continuing destination for business and leisure travelers in 2011 and beyond. 

The appetite for premium luxury brands ... will grow as the society gets richer, hence more niche, premium luxury brands are expected to enter the market in the next year or so.— Dirk De Cuyper, GM, Waldorf Astoria Shanghai

“We foresee that there will be more hotels coming in to the market and the competition among the high-end hotels will be fierce just like in the past and in the future,” he notes. "The situation in Shanghai is not a surprise."

Although additional competition is no shock to seasoned veterans, the scale of this onslaught is.

A recent IHG report predicts that by 2025, there will be more hotel rooms in China than in the United States. And that growth in supply will be driven by the demand of the developing Chinese economy.

With more rooms, possible lower occupancy may be responsible for a worry line or two, but more hoteliers are choosing to embrace the city’s post-Expo infrastructure face lift, reputation and ensuing opportunities, notes Ted Zhu, executive assistant manager of Swissôtel GRAND Shanghai. He adds that these improvements are drawing people to the city, even after the Expo is gone.

“The development and continued improvement to the local and regional transportation networks, including high speed trains, will lead to an increase in business volume for guests desired to travel and stay in Shanghai and still be able to conduct regional business," says Zhu.

2. A city infested with M.I.C.E.

Don’t call the exterminators, just yet.

With Shanghai's ever-increasing profile in China and extended transportation infrastructure, a forecasted increase in M.I.C.E. (meetings incentives, conferences and exhibitions) just may be one of the city’s saving graces, says Dirk De Cuyper, general manager of the new Waldorf Astoria Shanghai on the Bund.

“There have been signs of sliding room occupancy and rate adjustments in Shanghai after the Expo,” says De Cuyper. “However, the rate adjustment also makes Shanghai more attractive a city for business. In fact, the new supply of hotel rooms and venues is attracting event organizers back to Shanghai again, where the city’s increase in prices over the years have made it too expensive for much M.I.C.E. business. It is actually a healthy adjustment that will benefit the city in a long run.”

With the development and continued improvement of the local and regional transportation networks, including high speed trains, will lead to an increase in business volume for guests desired to travel and stay in Shanghai and still be able to conduct regional business.— Ted Zhu, executive assistant manager, Swissôtel GRAND Shanghai

Silvio Rosenberger, general manager of the Renaissance Shanghai Pudong, agrees.

“The Expo helped to ramp up Shanghai’s reputation and of course helped to improve infrastructure and traffic,” he says. Although the city is facing declining room rates, he believes "that we will be able to gain a few more opportunities in the M.I.C.E. segment and can look at a gradually recovered corporate segment.” 

3. Luxurious basics 

Ultimately, a hotel’s survival may depend on its ability to cater to China's increasing population looking for a luxury stay.

A rising standard of hotel basics as well as guests demanding more specialized hotel services and “experiences” will be par for the course in 2011. 

“We are aware of the growing demand for hotels that are less structured than traditional brands -- hotels that provide guests with not only great quality accommodation but something different, a personality,” says Bruce Ryde, general manager of Hotel Indigo Shanghai, the south Bund’s latest upscale boutique residence. 

Within the next 15 years, IHG's Barr notes that the middle class in China will be more than twice the size of the middle class in the United States based on purchasing power, and they're ensuring that the hotels they're staying in are up to their rising standards.

The Puli's van der Valk agrees that meeting Chinese consumers' rising expectations is key to survival in the Shanghai hotel market in 2011.

“How to stand out among the hotels will be the all time question for all of us in 2011, and there is always one correct answer to it -- good service. Following service, the atmosphere you create and what you can do extra that provide the touches your guests are looking for will also be continuous lessons for all the Shanghai hotels.” 

This new understanding of the need for the basic luxuries reflects the fact that China is slated to become the number one consumer of luxury goods within just five years -- with an ever-growing appetite for luxury including accommodation.

• More on CNNGo: Hotel Indigo opens on the Bund

"The rapid growth in wealth and sophistication has prepared China as a market for refined luxury experience and goods," says De Cuyper.

"Chinese guests are no longer satisfied with the apparent. There is a huge market for understated premium brands.  The appetite for premium luxury brands, whether hospitality or consumer goods, will grow as the society gets richer, hence more niche premium luxury brands are expected to enter the market in the next year or so."

He continues: "On the other hand, the demand for premium hospitality will remain on the rise with the rapid increase of high net worth individuals in China. Room rates for premium hospitality will be able to sustain due to high demand.”