China’s hotel sector shines, poised to outperform through 2026 on strong travel demand

As US President Donald Trump makes a state visit to Beijing this week, international arrivals to China also jumped in the first quarter, fuelled by the country’s expanded visa-free entry policies for more countries.

Four international hotel groups – Hilton Worldwide Holdings, InterContinental Hotels Group (IHG), Marriott International, and Hyatt Hotels – reported improved revenue per available room (RevPAR) performance on both quarterly and yearly bases, according to a research note by Deutsche Bank on Wednesday.

RevPAR, a key industry metric, tracks a hotel’s ability to generate revenue from its entire room inventory.

Hyatt posted a 12.4 per cent year-on-year RevPAR rise, while Marriott International and IHG both climbed 5.7 per cent, and Hilton added 1.3 per cent. Deutsche Bank attributed the growth to higher occupancy and average daily rates.

The strong growth of international hotel chains in the first quarter came as China’s overall RevPAR outpaced the global average for the first time on record, Deutsche Bank said.

“China’s travel sector is rebounding as expanded visa-free policies and restored flight capacity release pent-up demand, with tier-one gateway cities benefiting first from inbound recovery, particularly in corporate, premium leisure, and international travel flows,” said Yong Chen, an associate professor at EHL Hospitality Business School in Switzerland.

“International tourists from long-haul markets such as western Europe and North America have high purchasing power that enables them to purchase luxury hotel services.”

Hyatt’s strong quarter was supported by leisure travel during the long Chinese New Year holiday and improved inbound travel demand. The hotel group expects the trend to continue through 2026.

Marriott – which operates more than 700 hotels in mainland China, Hong Kong, Macau and Taiwan – raised its outlook for the country, projecting full-year RevPAR growth in the low single digits.

“China’s market is opening up new consumption opportunities,” said Yibing Mao, president, Greater China at Marriott International. “With demand for premium consumption staying strong, travellers no longer focus solely on reaching their destination, but increasingly prioritise the overall travel experience. We will further deepen our engagement in this dynamic market.”

Despite soft consumer sentiment in China, the hotel industry has shown resilience relative to other discretionary categories since the fourth quarter of 2025. Deutsche Bank said it expected the sector – a unique bright spot among all consumer categories – to continue outperforming throughout 2026.

In the first three months, 8.31 million foreign travellers visited China under visa-free policies, up 29 per cent year on year, accounting for 78 per cent of all inbound international visitors, National Immigration Administration data showed. During the Labour Day holiday from May 1 to 5, China recorded 436,000 inbound foreign travellers via visa-free entries, a nearly 15 per cent year-on-year rise.

Still, rising oil prices cloud the outlook.

“Looking to the second quarter, April demand remained solid, driven by strong leisure travel during spring break and the Ching Ming Festival, alongside improving business demand,” said Sammi Xu, a Deutsche Bank analyst, in the report.

“However, the Labour Day holiday period was softer than expected, partly due to high fuel costs and adverse weather.”

The outbreak of the US-Israel war with Iran on February 28 sent oil prices soaring, with Brent crude jumping to about US$106 a barrel this week, up from US$73 per barrel in late February.

This has pushed many industries to grapple with higher costs, with the air travel sector bearing the brunt. In Europe, jet fuel prices reached US$1,700 per tonne, 2.5 times higher than the average level of last year, according to the International Air Transport Association.

Xu said the primary uncertainty lay in the third quarter, because expensive summer flight tickets could dampen family and group travel. Hotel operators were expected to monitor demand closely and adjust pricing strategies to optimise RevPAR if high fuel prices persisted.

Zhu Wenqian in Beijing