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Filling the Gap: China’s Expanding Upper-Midscale Market

What we are going to tell you now should not come as a surprise: China is doing pretty well managing the pandemic. Specifically, its hospitality sector has recovered to about 70 to 80 percent of pre-covid levels, according to China's Hospitality Association (CHA). That is an impressive rate, given the relatively dismal performance, other countries are currently boasting. While there may be many reasons why exactly that happened and how (and if) those results could be replicated, another potentially interesting point to explore is the growth speed of certain hospitality markets, as some of them are definitely outperforming the others.

That being said, all eyes are on the upper-midscale properties, the ubiquity of which in China managed to spread even during some of the harshest stages of the pandemic. Hampton by Hilton, for example, opened 53 new hotels in the country during 2020, including three in Beijing. The figure is even more impressive given a somewhat strained China – USA relationship, negatively impacted by the trade war. However, despite the difficulties, the majority of the brand’s hotels have seen a satisfactory occupancy rate after the Spring Festival.

So what fuels such interest towards this particular market? Turns out, the basic supply-demand ratio could explain much of the phenomenon! While the developed countries usually boast over half of their hotel supply in the upper-midscale sector, in China the respective number stays at just over 20 percent. Consequently, while the budget and luxury demand are being amply satisfied, the middle class is left to choose between the two options that are not ideally suited to them. Given the speedy growth of the citizens’ disposable income and an overall upgraded consumer capacity, it is only natural to expect brands to start pouring into this niche rapidly.

Moreover, taking into consideration the rising number of people traveling domestically and for business, this trend does not seem to be slowing down any time soon. Hopefully, the vaccine rollout and the gradual ease of travel restrictions will allow for this theory to be checked in practice.

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