Taiwan Hotels Channel Tourism Surge

Swimming pool at The Sherwood Taipei

Now that Taiwan is on the map for more visitors, its hotel sector is enjoying an unprecedented boom.

Taiwan’s hotel sector is thriving, buoyed by the island’s transformation into an up-and-coming destination for Asian travelers. Since 2008, when the Taiwanese government eased restrictions on Chinese visitors, foreign tourist numbers have jumped from 3.8 million to 9.9 million, a 160% increase.

Last year’s nearly 10 million foreign tourist arrivals marked a new high, and an increase of 23.6% over 2013. The number of visitors from China, Japan, South Korea, and Malaysia all rose by double-digit percentages, according to government data. Chinese visitors now comprise 40% of the market.

New hotel openings herald a stunning turnaround for a sector that had been stagnant for the first decade of the new millennium. “Taiwan was Asia’s best-kept secret.”

The sustained tourism boom is changing the face of Taiwan’s hotel sector. Top global hospitality brands, which ignored Taiwan for years as they ramped up expansion in China and Southeast Asia, are now giving the island a second look.

The change is most visible in Taipei’s five-star segment, which is critical for attracting high-end leisure travelers and businesspeople. As of 2010, the Taiwanese capital had four internationally branded five-star hotels: the Grand Hyatt, Shangri-La’s Far Eastern Plaza, the Westin, and locally owned but with an international presence, the Regent. All had opened in the 1990s and were showing their age.

An external view of the Hotel Cozzi.
An external view of the Hotel Cozzi.

But since then, a slew of luxury hotel openings has occurred. In 2011, Starwood launched its upscale Le Meridien and W brands within a few blocks of each other – and of the Grand Hyatt – in the posh Xinyi district. A year later, Japan’s Okura opened its high-end Prestige brand near the corner of Nanjing East and Zhongshan North Roads.

Last year, Hong Kong-based hotel operator Mandarin Oriental opened a palatial 303-room property on breezy Dunhua North Road, aiming to tap Taipei’s burgeoning luxury travel market. Priced at a standard rate of NT$16,500 per night, its guestrooms are among the most expensive in the city.

U.S. hospitality giant Marriott is entering the Taiwan market as well. In July, it will launch the 320-room Taipei Marriott in the city’s Dazhi district, billing it as “the only hotel in Taipei offering both city and mountain views.”

The many new hotel openings herald a stunning turnaround for a sector that had been stagnant for the first decade of the new millennium. “Taiwan was Asia’s best-kept secret,” says Marcel Holman, general manager of Shangri-La’s Far Eastern Plaza Hotel Taipei. “Its hospitality sector was very tame for a very long time.”

20 new hotels opened in Taiwan between July 2008 and April 2015, with 226 more set to open by mid-2016. From mid-2008 to April 2015, 1,417 existing hotels were also renovated. Overall, new investment in Taiwan’s hotel sector between 2008 and 2016 is forecast to reach NT$351 billion (US$11.35 billion)

What caused a decade of sluggish growth in the Taiwan hospitality sector? In the view of Wayne Liu, deputy director general of the Taiwan Tourism Bureau, the outbreak of severe acute respiratory syndrome (SARS) in 2003 had a detrimental effect on new investment in hotels, which had already slowed from the 1990s. Taiwan reported 671 probable cases of the disease and 84 deaths, according to the World Health Organization.

The global financial crisis further dampened investor sentiment even as foreign tourist arrivals recovered, Liu adds.

Dories Lu, director of hotel services at CBRE Research in Taipei, takes a different view. “Before restrictions were removed on Chinese visitors, demand was weak,” she says. “There were only about 3.5 million visitors a year to Taiwan, which was a pretty small market for hotels compared to elsewhere in Asia.”

The China catalyst

At the 2014 Kaohsiung International Travel Fair, President Ma Ying-jeou said “I never dreamed that Taiwan would become a tourism country.” The president may have been recalling the languid travel sector of a decade earlier. But he likely had an inkling of what would follow when he led the drive to relax restrictions on Chinese visitors and launch direct cross-Strait flights in 2008.

An Oasis Room at the Madison Taipei Hotel
An Oasis Room at the Madison Taipei Hotel

That policy decision sparked the current boom in the hotel sector, analysts say. “Opening Taiwan to Chinese visitors gave us an enormous foreign tourist market, with almost limitless potential to grow, [composed of people] able to get here easily,” says Lu of CBRE Research.

As a result, investor interest in Taiwan’s hospitality sector surged. According to government data, 820 new hotels opened in Taiwan between July 2008 and April 2015, with 226 more set to open by mid-2016. From mid-2008 to April 2015, 1,417 existing hotels were also renovated. Overall, new investment in Taiwan’s hotel sector between 2008 and 2016 is forecast to reach NT$351 billion (US$11.35 billion).

Meanwhile, Chinese visitor numbers have expanded more than tenfold from 330,000 in 2008 to 4 million in 2014.

Investors are ebullient about potential business from Chinese travelers. Lin Ming-chun, owner and developer of the Mandarin Oriental, told reporters last year he expects Chinese tourists to comprise 50% of the hotel’s guests, making them its largest market.

The Marriott, too, is aiming to tap Chinese arrivals in Taiwan, after spending more than a decade building up its portfolio in China. It has 80 hotels on the mainland, with 23 in Shanghai alone. Marriott sees strong opportunity in Taiwan as cross-Strait economic ties deepen, says Henry Lee, the company’s Greater China chief operating officer.

Chinese tourists currently comprise 18.6% of guests in the island’s five-star properties, according to the Tourism Bureau. But while the five-star hotels are vying for Chinese customers, many of those tourists are selecting more modest accommodations. “Chinese visitors to Taiwan tend to prefer spending less on accommodations and more on shopping,” says Liu of the Tourism Bureau.

An increasing number of young, independent Chinese travelers are also coming to Taiwan, attracted by the island’s culinary and scenic charms. They typically choose inexpensive accommodations.

The Madison Taipei's Urban 331 whiskey bar
The Madison Taipei’s Urban 331 whiskey bar

Belle Guo, 25, a native of southwestern China’s Yunnan province who works as a public-relations professional in Hong Kong, visited Taiwan with her boyfriend last November. “We came to enjoy the delicious food, the relaxing environment and the beautiful scenery. Taiwan is a nice change of pace from Hong Kong,” Guo says. She and her boyfriend stayed in a Taipei apartment they found on Airbnb because it offered “an excellent value,” she adds.

Max Zhang, a 27-year-old service manager in a Shanghai private school, traveled to Taiwan in December 2014 to see a former Taiwanese colleague who had moved back from China to Taiwan. Zhang stayed with her friend in Taipei, and in bed and breakfasts in Yilan and Hualien. “I like how it’s possible to soak in hot springs, eat fresh seafood, and do some good shopping all on one trip,” she says. “Taiwan is not too big and the efficient public transport makes it easy to get around.”

A new business travel market

While Taiwan’s leisure travel market is growing fast, businesspeople seem to be leaving the island off their itineraries. Business travelers decreased from one-third of arrivals in 2000 to just 8% in 2014, according to government data. Lu of CBRE Research attributes the decline to global companies shifting resources to China.

But deepening cross-Strait economic ties may revive Taiwan’s ailing business arrivals. Five-star hotels stand to gain significantly. “Chinese leisure travelers do not usually stay in Taiwan’s five-star hotels,” says Lu. “Chinese businesspeople are the ones who choose luxury accommodations.”

The Sherwood, one of Taipei’s most prominent five-star properties, has seen rising interest from Chinese business travelers since 2008, says general manager Achim v. Hake. “We frequently have guests who belong to delegations from China’s provinces,” he says.

To boost the number of Chinese business arrivals, v. Hake urges the government to further relax visa requirements. “It’s already easier for Chinese businesspeople to get here thanks to the direct flights from many cities in China to Songshan Airport,” he notes. “But relaxing the visa policy would make traveling to Taiwan even more convenient for them.”

The new Marriott, which is operated by Sherwood Plaza, the same company that manages the Sherwood, also has an eye on the business travel sector. At a January press conference celebrating the Sherwood’s 25th anniversary, Sherwood Plaza managing director Mark Liu told reporters that the Marriott would be targeting the meetings, incentives, conferences, and exhibitions (MICE) business.

The Grand Ballroom at the Taipei Marriott
The Grand Ballroom at the Taipei Marriott

The Marriott’s 15 function rooms and three ballrooms will together be able to accommodate 2,000 people, offering the largest capacity of any hotel in Taipei, Henry Lee notes. Other 5-star hotels in Taipei have either only one or two ballrooms, he adds.

Construction of large-scale MICE infrastructure will bolster the expected uptick in business arrivals, market observers say. The Kaohsiung Exhibition Center opened in April 2014, and in Taipei an addition to the Nangang Exhibition Hall will be completed in 2017. The second hall’s 5,000 booths are expected to help alleviate the space crunch currently faced by large-scale exhibitions in Taipei. In late 2018, the Taichung Convention and Exhibition Center – with the capacity to house 3,353 booths and 30,000 visitors – will be ready for business.

The regional incentive travel market holds strong potential for Taiwan, says the Tourism Bureau’s Liu. For companies in East and Southeast Asia, Taiwan is ideal for an incentive trip, he says, noting the island’s many natural attractions and proximity to neighboring countries.

A diversified portfolio

With the surge of Chinese arrivals, some observers have questioned whether Taiwan’s tourism sector is placing too much importance on that market. After all, despite the current cross-Strait détente, Taipei and Beijing technically remain in a state of war. Renewed political fallout between the two sides could stymie the flow of Chinese visitors, delivering a crushing blow to Taiwan’s tourism sector.

But not all hoteliers are focused on Chinese travelers. The 124-room Madison Taipei, a boutique hotel owned by the Cathay Hospitality Management Co., caters to business travelers and independent tourists from the United States and Europe. Cathay also operates two boutique hotels under the Hotel Cozzi brand in Taipei and plans to launch three more in southern Taiwan.

Chinese guests comprise about 10-15% percent of the Madison’s market, according to Cathay Hospitality general manager Phyllis Chuang. “Many visitors from China expect a grand lobby and multiple food and beverage outlets,” she says. “Only a more cosmopolitan independent Chinese traveler would want to stay in a boutique property like the Madison.”

In southwestern Taiwan’s Alishan National Park, a top Chinese tourist destination known for its ethereal sunrises, there is one hotel that does not even accept bookings from Chinese tour groups. “We do just fine without them,” says the proprietor, who asked to remain anonymous. “We have a lot of domestic guests. There are other, bigger hotels here that focus on the Chinese tour groups.”

Liu of the Tourism Bureau is quick to emphasize Taiwan has been successful attracting tourists from throughout Asia, not only China. “There may be tour operators who would like to see a greater focus on China for reasons of volume, but we won’t put all our eggs in one basket,” he says.

He notes that South Korea – not China – is Taiwan’s fastest growing foreign tourist market. In 2014, South Korean arrivals rose 60% year-on-year to more than 527,000 visitors. Liu attributes the increase to the positive exposure generated for Taiwan by shooting episodes of the South Korean television shows “Grandpas Over Flowers” and “Running Man” in some of the island’s prime tourist spots. The Tourism Bureau invited the producers of the programs to film in Taiwan as part of a promotional campaign. “When South Koreans saw the charms of Taiwan on familiar TV programs, they became a lot more interested in visiting,” Liu says.

Since 2008, annual arrivals from Hong Kong have more than doubled, from 619,000 to 1.38 million, while Japanese arrivals have risen by a third from 1.1 million to 1.6 million, he adds.

Overall, hoteliers remain bullish on the Taiwan market, and investor appetite appears strong. The Sheraton Four Points will open in Penghu on July 30, the first internationally branded five-star hotel on the archipelago. Cathay Hospitality will launch a Marriott Courtyard in Taipei’s Nangang district in the second half of 2015 and a Crowne Plaza in Taoyuan next year. Marriott also has plans to launch its Renaissance brand in the Shilin district of Taipei in 2017. And in 2018, Britain’s InterContinental will open a hotel in Taichung.

Lee of Marriott is particularly sanguine. “Marriott International sees unlimited potential in Taiwan’s future,” he says.

2 comments

  1. Hi Matt,

    First of all, amazing article! I was wondering which government site you found your data from? For instance, the number of hotels expected to be opening. Thank you so much!

    Best,

    Susan Wang

  2. Taiwan is considered as one of Asia’s tourist destination because of its stunning and amazing spots. Not just that, they also have affordable, unique and huge hotels. As the tourism increases in their country, their businesses are also in demand especially in hotel. Most of the travelers and visitors would love to experience and stay in their low-cost and expensive hotels. Checking my schedule this year and hoping to be there before the year end. Thanks for this post Matt.

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