The World Tourism Organization has forecast that the Chinese mainland is expected to become the world's second most-popular tourism destination after France by 2010.
Several factors will contribute, including a strong economic backdrop, and further opening of the domestic tourism market to foreign tour operators.
There is also a fast-emerging MICE market (meetings, incentives, conventions and exhibitions) as well as several milestone events like the 2008 Beijing Olympics and 2010 Shanghai World Expo.
Therefore, key gateways such as Shanghai and Beijing continue to be the preferred investment locations for hotels, while investors are also showing interest in hotels in more prominent second-tier cities where opportunities are more available.
The potential gains are considered attractive, says a recently published industry digest by Jones Lang LaSalle Hotels.
Shanghai
Tourism and demand for accommodation in the country's commercial and financial center is expected to grow over the coming years.
Shanghai remains the pilot market on the Chinese mainland for new hotel brands, says the report.
In 2006, JIA boutique hotel launched its outlet on Nanjing Road W. whilst Accor has unveiled a Pudi boutique hotel close to Fuxing Park. Under development are a Conrad and a Jumeirah in Xintiandi.
Drivers for robust accommodation demand include the city's hosting of world-class events such as the Special Olympics, FIFA Women's World Cup in 2007, annual events such as Formula One and in particular, World Expo 2010.
In addition, the development of three major convention areas in Pudong, Hongqiao and Nanjing Road W. as well as new exhibition facilities will further cater to the growing MICE demand. The construction of Shanghai Happy Valley, which is supposed to be the biggest theme park in eastern China, will likely attract about five to seven million visitors every year upon its completion in 2010.