When China optimized its COVID-19 response measures late last year, a recovery in tourism was expected but very few had an inkling of the boom that would ensue. Now, sustained recovery in local tourism and the attendant business growth are encouraging both international and domestic hotel groups to ponder their next big moves in the country.

For instance, leading hotel chain InterContinental Hotels Group, comprising six luxury brands such as Six Senses, Regent, Kimpton and Vignette Collection, said it will open nearly 500 new hotels in China in the next few years.

That staggering number can be understood in proper perspective by studying the possible impact of continued policy improvements on both domestic and international travel in the post-pandemic landscape. Chinese consumers are becoming more sophisticated and diverse in their preferences, making it essential for the industry players to proactively understand market trends, the company said.

"Consumers are reigniting their passion for travel, resulting in a positive upturn for the hotel industry. This trend is expected to contribute favorably to the performance of IHG in the region," said Lu Haiqing, chief corporate affairs and strategic relations officer of IHG Greater China.

"We hold a positive outlook on the growth prospects of the Chinese market and we are confident in its potential, especially considering the robust recovery of domestic travel, which was similar to the pre-pandemic level seen in 2019 in terms of domestic business," Lu said.

In the first half of this year, IHG's revenues in China, its second-largest market, jumped 94 percent year-on-year, but are still 3.8 percent lower than the 2019 level, according to its earnings report. The business performance reflected an excellent rebound in demand since China lifted its travel restrictions in December 2022, the company said.

IHG has been in China for 48 years and remains one of the first global hotel groups with a standalone China business. The company said it sees China as an important growth engine with about 10.5 percent share in IHG's global open portfolio, and over 25 percent of its pipeline, meaning every one out of four IHG hotels to be opened worldwide will be in China.

"IHG's growth in China has seen a significant contribution from a variety of cities and regions. Our presence is not only concentrated in major metropolitan areas but has extended to the thriving markets in second- and third-tier Chinese cities, with each playing a pivotal role in China's economic landscape," Lu said.

Chinese millennials and Generation Z (those born after 1995 and into the 2000s) have been pivotal in driving the recovery. Lu said these groups among travelers are not just looking for a place to stay, but a holistic experience, blending both leisure and occasionally work. This trend is growing, and the company has been keen on tapping into it.

IHG has strategically expanded into emerging economic zones and popular tourism destinations, which is in line with China's strategic pillars for economic development and keeping in step with the company's localization strategy. As of June, the group's hotels located in the second- to fourth-tier Chinese cities accounted for about 75 percent of the total rooms within the group in China.

"Our outlook is very positive for the secondary market business, by utilizing both the management agreements and a franchise model tailored for the local market," Lu said.

With continuous innovation of essential brands such as Holiday Inn Express, it has helped the group to gain traction in secondary markets. The number of Holiday Inn Express hotels including those already opened and to be opened in China is expected to exceed 500.

Meanwhile, bed-and-breakfast businesses nationwide have improved their performance. So far this year, the booking volumes of B&Bs nationwide have exceeded the level recorded in the same period of 2019, according to Trip.com Group, China's leading online travel agency.

By 2025, Trip.com plans to build 100 high-end village resorts in the country to attract more urban tourists. In summer this year, more than 10 of its village resorts located in different regions in China saw rooms sold out for multiple times, the company said.