Both hotel and serviced apartment market in Guangzhou are on an upward trend due to a increasing number of foreign investors and tourists visiting Guangzhou. Guangzhou hosts Canton Fair twice a year which attracts over 400,000 visitors, leading to a rising demand for hotels and serviced apartments. 80% of total hotel demand in Guangzhou comes from meetings, incentives, conferences and exhibitions, best known as MICE. In 2014, the number of five-star hotel rooms in Guangzhou rose to 13,331, with the average daily rate increased from RMB 800 in 2012 to RMB 837 in 2014, up 4.6%.
Nonetheless, with the recent anti-corruption policies in China, hotel demand in Guangzhou from MICE sector still faces certain pressure. By the end of 2014, average occupancy rate of top-tier hotels in Guangzhou moved down to 60%, down 5% comparing to its peak of 65% in 2011. With the Guangzhou government working on infrastructure and transport renovations to attract tourists, the new focus of hotel demand may shift from MICE sector to tourism sector.
For serviced apartment market, both occupancy performance and monthly rent of serviced apartments in Guangzhou continue to rise. Average vacancy rate fell from 18.2% in 2012 to 15.2% in 2014, while the monthly rent rose to RMB 207 per square metre in 2014, up 11% compared to the monthly rent of RMB 186 in 2012
Demand for serviced apartments in Guangzhou is mainly contributed by foreign manufacturers, retailers and consulates as they have a long term stay in Guangzhou. Nonetheless, rising production cost in China has become a major concern for foreign investors especially manufacturers, driving them to retreat or slow down their expansion plan. On the other hand, improving local economy also attracts domestic business executives from other provinces to stay in Guangzhou. Sources reported that share of domestic tenants in serviced apartment market gradually increased, reflecting that domestic rental demand of Guangzhou serviced apartments is expected to rise.
The overall market sentiment for serviced apartment market remains optimistic. As Guangdong Free Trade Zone was launched in December 2014, more foreign and domestic investors and business executives would be attracted to develop their business in Guangzhou, leading to a rising demand for local serviced apartments.