The demand for high-end hotels in China is sinking in a financial downturn that is showing no fast signs of recovery.
"There isn't enough demand for top hotels in front-line cities such as Beijing, Shanghai and Guangzhou, as these markets are saturated," said Lily Ng, senior vice-president of Jones Lang LaSalle Hotels.
"And the concern in the second-tier cities is whether local consumption can cover the high investment," Ng said.
Transaction volumes of Chinese hotels sank from $1.6 billion in 2006 to $1 billion in 2007 to $0.3 billion in 2008, according to statistics from Jones Lang LaSalle Hotels.
Four-star and five-star hotels apparently are faring worse.
According to the global hotel consulting company HVS, the top five luxury hotel markets at the Chinese mainland - Sanya, Beijing, Shanghai, Lijiang and Tianjin - reached a supply-and-demand balance in 2006 and 2007 and an oversupply in 2008.
During the past four years, the supply of five-star hotels in these cities increased by 15 percent, while demand only grew by 10 percent.
As the second-largest city after Hong Kong in the number of new room supplies for the next two years in China, Shanghai will offer more than 11,340 new rooms between 2009 and 2011 to meet the demands of the Shanghai 2010 World Expo.