The launch of the China (Shanghai) Pilot Free Trade Zone is predicted to boost demand for luxury and business hotels in a city that is battling a slump in tourism.

"While the overall supply of hotel rooms in Shanghai is growing at a faster pace than there is demand, the hospitality industry around the free trade zone may experience a boom," said Zhu Chaolun, vice-president of Jones Lang LaSalle's Hotels and Hospitality Group.

"Hotels that have already started operation in the region are performing well and are holding a positive outlook," Zhu said.