While the economy continues to struggle globally, one area on the rebound for China is its hotel market. Beginning in 2010 and through 2011, there has been an increased demand for hotel rooms.

China’s luxury hotels are seen as a safe place, according to hotel executives, with 2011 occupancy rates at 60 percent.

Charlie Dang, general manager of Northern China for Starwood Hotels & Resorts Worldwide Inc. (NYSE:HOT), said ”We haven’t felt the crisis that they are experiencing in the U.S. and Europe. The domestic economy is still very strong. Generally the second- and third-tier cities are growing rapidly and that helps our business.”

In the last five years, the American hotel company has opened 40 hotels on China’s mainland, bringing its total to 92 hotels with an additional 90 in the works.

The InterContinental Hotels Group Plc’s (NYSE:IHG) Crown Plaza hotel in Dandong, a third-tier city in Northeast China’s Liaoning providence, reported a summer occupancy rate of 80 percent; in the winter it was down to 60 percent.

As the only luxury hotel in this port city, sitting on the border between China and Democratic People’s Republic of Korea, these numbers are considered good, according to the hotel’s public relations manager.

“Our business grew 15-20 percent last year. This year, we’re expecting something like 10-15 percent growth, so we’re pretty optimistic about the future,” Ren Shixuan said.

Its current clientele is primarily tourists, at 60 percent.

Competitive Marketplace

Hotels expanded in China during 2011 among a competitive marketplace thanks to a wealthy domestic market driving the demand.

Greater China’s largest hotel, the InterContinental, operates 162 hotels with an additional 143 in development. The domestic market comprises 60 percent of the hotel’s business across 22 Northern China hotels.

According to the Hurun Report (China’s equivalent to Forbes’ Wealthiest List), China had 960,000 individuals with a personal wealth of 10 million yuan ($1.5 million) or more in 2010, representing a 9.7 percent year over year increase by 85,000 people.

Dang said, “Chinese customers used to be like 15-18 percent. Now it is 60 percent Chinese, so that’s where you see the power of Chinese customers growing.”

“The economic development of China makes it an attractive hotel development market as more hotel rooms are needed,” said Konstanze Auernheimer, director of marketing and analysis at STR Global, a consulting and research group that has tracked hotel occupancy levels in China.

Strong Demand in Beijing

Beijing is doing particularly well in occupancy rates. According to the consulting and research group STR Global, Beijing’s occupancy levels for the year reached 69 percent as compared to Shanghai’s 56 percent.

The outlook is promising for five-star hotels in Beijing but there won’t be a peak of hotel rooms.

One market helping Beijing is its millionaires; they are the largest number in China. According to the Hurun Report, in 2010, 17.7 percent of China’s luxury customers (170,000 millionaires) lived in Beijing as compared to the Guangdong  province’s 157,000 (16.4 percent) and Shanghai’s 132,000 (13.8 percent).

In addition to accommodating the wealthy domestic market, the growth of international luxury hotels in China is a part of a key marketing tool that has been employed to create brand recognition and loyalty among Chinese travelers for their overseas travel. China moved toward new tourism records with more than 50 million outbound travelers in the first nine months of 2011, according to the China Tourism Academy.

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