Publication Date


Executive Summary

Purpose: In China, many mixed-use projects included a luxury hotel on the property. The present study aims to answer two questions: Do mixed-use projects benefit from including a hotel? Do hotels benefit from being located in a project?

Design/Methodology/Approach: The present study collected a sample of 76 mixed-use projects from Sina Commercial Real Estate database (Sydc.sina.com.cn). Hotel performance data are provided by STR. A hedonic model was used to test hotels’ effect on office rents and residential unit prices in mixed-projects. A matched-subjects designed was used to analyze the effect of mixed-use projects on hotel performance.

Key Findings: The analysis indicate that mixed-use projects with hotels have higher residence price, but not office rent, compared to projects without a hotel. Hotels located in a mixed-use project have higher RevPAR and ADR than their stand-alone counterparts, but there is no difference in occupancy rate.

Implications for Practice: Mixed-use project developers could consider increasing the number of units in the service apartment to take advantage of the residential unit price premium. Hotels located in a mixed-use project could command a premium ADR without losing occupancy to their stand-alone counterparts. They could aim to preserve their price premium and expand the market with service or product instead of discounts.

Originality/Value: This study empirically tested the effects of a common practice adopted by Chinese mixed-use developers. The results could help mix-use developers and hotel operators by pointing out the specific channels that deliver the benefits of including a hotel in mixed-use projects.

Relevance of the Topic: In China, some local governments may request mixed-use projects to include a luxury hotel as a condition for investment incentives. However, it may not be easy for those hotels to reach breakeven quickly in saturated markets. As a result, some developers may hope to leverage the hotel brand to enhance the value of other components in the project (Rapoza, 2012). The present study tested the economic implications of this phenomenon from the project’s and the hotel’s perspectives.