Ted Fang, Tera Capital Founder – The Rise of China’s Hospitality Market

Ted Fang, Tera Capital, Tera Partners, Tera Realty (Tera Sothebys)

The Chinese hospitality market has seen remarkable growth in recent years, thanks to the country’s booming economy, increased disposable income, and a burgeoning middle class. China is now the world’s second-largest economy and is home to a population of over 1.4 billion people. As a result, the hospitality industry in China has become one of the most vibrant and dynamic sectors of the economy.

The hotel industry in China has seen significant growth in recent years, with more and more foreign hotel brands entering the market. According to a report by China Tourism Academy, the hotel industry in China saw a 12.6% year-on-year increase in revenue in 2018, with the total revenue reaching RMB 678.5 billion. This growth can be attributed to the rising demand for quality hotel services, increased tourism, and the explosion of the middle class.

The restaurant industry is another key sector of the Chinese hospitality market. Chinese cuisine is popular all over the world, and the demand for Chinese food continues to grow. The Chinese restaurant industry has grown rapidly in recent years, with a CAGR of 10.6% between 2013 and 2018, according to a report by Research and Markets. The report also forecasts that the industry will continue to grow at a CAGR of 8.5% between 2019 and 2023.

One of the unique features of the Chinese hospitality market is the emergence of the online travel agency (OTA) industry. OTAs have revolutionized the way people book travel and hotel accommodations, making it more convenient and accessible. The two major players in the Chinese OTA market are Ctrip and Meituan Dianping, with a combined market share of over 70%. The growth of the OTA industry has also had a significant impact on the traditional hotel industry, forcing them to adapt to changing market conditions.

China’s hospitality market is not without its challenges, however. One of the most significant challenges is the intense competition in the industry. With the rise of the middle class and increased disposable income, more players are entering the market, making it increasingly competitive. Additionally, the Chinese government’s policy on tourism and hospitality is constantly changing, creating uncertainty for industry players.

Another challenge for the Chinese hospitality market is the quality of service. With so many new players entering the market, maintaining a high level of service quality can be challenging. The high turnover rate in the industry also poses a challenge, as it can be difficult to retain experienced staff.

In conclusion, the Chinese hospitality market is a rapidly growing sector of the economy, driven by increased disposable income, rising tourism, and the growth of the middle class. The hotel and restaurant industries, as well as the online travel agency industry, are all key players in the market. While the industry faces several challenges, the potential for growth and profitability is significant, making it an attractive investment opportunity for both domestic and foreign investors.

*This post was taken from the archives in 2019.

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