New Hotels Entering Shanghai

<B>New Hotels Entering Shanghai</B>

By Maria Lenhart

Anyone who wants proof that Shanghai is emerging as a Chinese commercial capital, which one day may rival Hong Kong, need look no further than the roster of international hotel companies eager to establish a presence there. Both Four Seasons and Starwood have hotels under development in Shanghai, and Accor opened its second hotel in Shanghai, the 320-room Novotel Atlantis, in June.

Most of Shanghai's new hotel development is clustered in Pudong, a burgeoning business district east of the Huangpu River, where futuristic high-rises have replaced farmland in just a few short years. Pudong is the location of the Novotel and Starwood's upcoming St. Regis Shanghai, as well as such new properties as the 612-room Pudong Shangri-La and 550-room Grand Hyatt Shanghai.

Fueling interest in Pudong is a nearby industrial free zone linked to the district by an expressway that also leads to the gleaming new Pudong International Airport, the main airport serving Shanghai. Dozens of international companies have set up manufacturing plants in or near Pudong, including Intel, IBM, Sun Microsystems and General Motors. As a result, Christopher Khoo, research director of the hospitality division of PricewaterhouseCoopers in Singapore, said occupancy levels are on the increase in Shanghai, reaching 76.2 percent in May 2000, a 15.7 percent increase over the same month last year. The current average daily room rate is $82.91, about 3.5 percent higher than last year.

Although Asian visitors to Shanghai continue to account for the majority of arrivals, Khoo said there has been a steady increase in travelers arriving from North America and Europe, comprising 32 percent of the total market in April. "The U.S.-China trade agreement (see story, above) will definitely be a positive boost for the future of hotel developments in Shanghai and to China in general," said Khoo. "It will ensure the long-term interest and viability of hotels in the Shanghai region as one of the target areas for inward investment in China." However, Khoo also noted that more than 2,000 hotel rooms are slated for completion in Shanghai by the end of 2001. "In the short term, with the new supply on the way, there will be a lot of competition for the business traveler, which will have an impact on overall room rates and occupancies."

Meanwhile, hotels such as the two-year-old Pudong Shangri-La are enjoying near sold-out occupancies this year. "About 80 percent of our market is business travelers, particularly those from the U.S. and the U.K., who are connected with the nearby high-tech companies," said Michael Cottan, general manager of the Pudong Shangri-La.

While relatively isolated when it opened in 1998, the Shangri-La quickly is being surrounded by other infrastructure, including an adjacent shopping mall, which will be one of the largest in Asia when it opens in early 2001. "When we first opened, we had to bribe the taxi drivers with free T-shirts to get them to come over to Pudong," said Lulu Uy, area director of marketing for the Pudong Shangri-La. "Now it's no problem."

Pudong also will get new transportation to downtown Shanghai when work on a people mover system, which will travel underneath the river to the city's main commercial district, is completed later this year.

While the Shangri-La and Grand Hyatt properties target top-end business travelers, the new Novotel Atlantis is priced for the midmarket, with rack rates of $160 to $180 for guest rooms and $200 to $220 for club level rooms. Special opening rates, valid through Dec. 31, start at $58.

Located near the landmark Oriental Peal TV tower and the Shanghai Exhibition Center, the Novotel Atlantis is on the top floors of the 50-story Shanghai International Ocean Shipping and Financial building. Accommodations include 13 suites, four executive floors and a floor with rooms designed for female business travelers. All rooms are equipped with voicemail and dataports. Meeting space at the hotel includes a ballroom accommodating groups up to 500 and seven smaller meeting rooms for 10 to 200 people.

Currently under construction in Pudong is the 345-room St. Regis Shanghai, set to open in July 2001. The luxury hotel will be the second St. Regis property in China, following the 273-room St. Regis Beijing, which opened in downtown Beijing in March. According to Lui Hui Jiang, director and general manager of the Shanghai Honta Hotel Co., which is developing the property, the hotel is certain to realize a good return on its $97 million construction cost.

"China's burgeoning economy has led to strong growth in the number of business travelers who demand high-quality, luxury accommodations, especially in new commercial areas like Pudong," he said. Accommodations at the 38-story hotel will include 50 suites and feature 516-sq.-ft. guest rooms, the largest in Shanghai. The hotel will offer 24-hour butler service, four restaurants and more than 70,000 square feet of meeting space.

Also under development is the first Four Seasons property in mainland China, the 440-room Four Seasons Shanghai. Set to open in 2002 at the civic center of Shanghai near the Huaihai Road shopping district, the hotel will feature a club lounge, four restaurants, a business center and 17,000 square feet of meeting space.