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5 White Paper on the Business Environment in China
of the market; it was reported in 2007 by trade publication As the market continues to develop, however, international
China Hospitality News, for example, that “by the end of brands are increasingly looking to cater their experiences to
[2006], 37 international hotel management companies had Chinese guests both in China and abroad. At the “21st Century
entered Chinese market with 60 brands of 502 hotels. e top Hotel Industry Summit” held in 2012, Tourism Management
director He Jianmin from the Shanghai University of Finance
ve that have opened the most hotels in China are Wyndham and Economics told China Daily that some international
with 159, InterContinental with 69, Accor with 43, Starwood brands—including Accor, InterContinental Hotels Group
with 37 and Marriott with 31,”12 and the leading international and MGM Hospitality—have already created localized brands
brands are, collectively, expanding not only in tier 1 cities but speci cally for the Chinese market.17
also into tier 2 and tier 3 cities as well.13
e appeal of launching local-styled brands is not limited
Budget hotels, however, seem to be proliferating faster to the Mainland, either; it was reported that there will be “88
and further than luxury brands. China Daily reported in mid- million Chinese travelers overseas by 2015”; other Summit
2008 an estimation that by the end of 2007 there were more attendees sagely agreed that “a custom hotel brand designed
than 100 budget hotel brands operating approximately 1,000 for China is also an e ective way to gain Chinese customers
locations across the nation,14 whereas one industry report who travel abroad.”17
more recently published gures indicating that the number of
locations had grown to 2,800 nationwide by January 2009.15* Still, it would seem that at least in the top segment of
Of the reportedly 1,200 hotels that were under construction the market existing international brands are faring quite well
in Asia Paci c as of July 2010, 802 were said by a China Daily already: a China Tourism Academy report found that by the
source to be on the Mainland, and a quarter of those reported end of 2010 “nearly 70 international hospitality brands from
to be in the “lower price category.”16 41 countries and regions” were “managing about 20 percent
of the country’s top-end hotels and taking 80 percent of the
U.S.-based budget chain Days Inn, for example, is pro ts.”18
planning to open 500 new properties over the coming ve to
seven years according to the Chinese franchise’s co-owner;13 One culprit for the spectacularly poor competition from
meanwhile, a tourism expert from the Shanghai Academy of Mainland hotel companies in terms of pro tability is the
Social Sciences predicts that more than 1,500 new hotels over lingering presence of non-hospitality-oriented state-owned
all categories will open on the Mainland every year from 2010 enterprises in the sector: despite Minister Li Rongrong of
to 20151 the State-owned Assets Supervision and Administration
Commission ordering SOEs to divest of “non-core hotel
Despite impressive growth, some challenges remain in the assets” in 2003, nearly a decade later “some 2,000 hotels
“China Market”, including “a mismatch in China between valued at trillions of yuan remain under SOE ownership”19
what was needed in the market and the desire of often public
sector investors to build statement ve star hotels,” (which we Although this brazen disobedience to a ministerial-level
read as government vanity projects) and, according to China o cial is somewhat surprising, China Daily reports several
Daily, “the poor level of sta training.”16 reasons why SOEs may not want to divest so quickly of their
hotel assets: rst, “some SOEs own the property managed by
Another issue attached to the conspicuous production internationally known hotel brands, which have many times
of high-end hotels is that, according to one analyst, they are brought faster returns than their core businesses.” Secondly,
often built to drive up the prices of attached o ces, residential “ine cient operations at many SOE-run hotels [makes]
apartments and retail spaces.13 potential buyers wary” and thirdly, “questions surrounding
existing hotel sta and tax liabilities are other hurdles to
Employee acquisition and retention continues to be potential sales.”19 In other words, while an SOE-owned hotel
problematic. According to “experts” quoted by China Daily, may be able to bend regulations and get away with poor
“compared with other countries, employee turnover at hotels e ciency, similar performance would be untenable for a
in China is very high.”17 private enterprise competing in the market.
Furthermore, as the industry as a whole expands the talent Following President Xi Jinping’s public push for
pool is not growing apace, leading to a situation in which government austerity, hoteliers “are taking steps to make their
“many hotels urgently need professional sta members, but properties look a little less fabulous” up to and including
are nding it even more di cult to recruit excellent employees
as the demand for hotel professionals increases.”17
*Admittedly, this gure comes from the abstract of a report, since its full contents are almost certainly beyond the scope of this ’White Paper’ and furthermore
cost in excess of 1,000 Euros.
200
of the market; it was reported in 2007 by trade publication As the market continues to develop, however, international
China Hospitality News, for example, that “by the end of brands are increasingly looking to cater their experiences to
[2006], 37 international hotel management companies had Chinese guests both in China and abroad. At the “21st Century
entered Chinese market with 60 brands of 502 hotels. e top Hotel Industry Summit” held in 2012, Tourism Management
director He Jianmin from the Shanghai University of Finance
ve that have opened the most hotels in China are Wyndham and Economics told China Daily that some international
with 159, InterContinental with 69, Accor with 43, Starwood brands—including Accor, InterContinental Hotels Group
with 37 and Marriott with 31,”12 and the leading international and MGM Hospitality—have already created localized brands
brands are, collectively, expanding not only in tier 1 cities but speci cally for the Chinese market.17
also into tier 2 and tier 3 cities as well.13
e appeal of launching local-styled brands is not limited
Budget hotels, however, seem to be proliferating faster to the Mainland, either; it was reported that there will be “88
and further than luxury brands. China Daily reported in mid- million Chinese travelers overseas by 2015”; other Summit
2008 an estimation that by the end of 2007 there were more attendees sagely agreed that “a custom hotel brand designed
than 100 budget hotel brands operating approximately 1,000 for China is also an e ective way to gain Chinese customers
locations across the nation,14 whereas one industry report who travel abroad.”17
more recently published gures indicating that the number of
locations had grown to 2,800 nationwide by January 2009.15* Still, it would seem that at least in the top segment of
Of the reportedly 1,200 hotels that were under construction the market existing international brands are faring quite well
in Asia Paci c as of July 2010, 802 were said by a China Daily already: a China Tourism Academy report found that by the
source to be on the Mainland, and a quarter of those reported end of 2010 “nearly 70 international hospitality brands from
to be in the “lower price category.”16 41 countries and regions” were “managing about 20 percent
of the country’s top-end hotels and taking 80 percent of the
U.S.-based budget chain Days Inn, for example, is pro ts.”18
planning to open 500 new properties over the coming ve to
seven years according to the Chinese franchise’s co-owner;13 One culprit for the spectacularly poor competition from
meanwhile, a tourism expert from the Shanghai Academy of Mainland hotel companies in terms of pro tability is the
Social Sciences predicts that more than 1,500 new hotels over lingering presence of non-hospitality-oriented state-owned
all categories will open on the Mainland every year from 2010 enterprises in the sector: despite Minister Li Rongrong of
to 20151 the State-owned Assets Supervision and Administration
Commission ordering SOEs to divest of “non-core hotel
Despite impressive growth, some challenges remain in the assets” in 2003, nearly a decade later “some 2,000 hotels
“China Market”, including “a mismatch in China between valued at trillions of yuan remain under SOE ownership”19
what was needed in the market and the desire of often public
sector investors to build statement ve star hotels,” (which we Although this brazen disobedience to a ministerial-level
read as government vanity projects) and, according to China o cial is somewhat surprising, China Daily reports several
Daily, “the poor level of sta training.”16 reasons why SOEs may not want to divest so quickly of their
hotel assets: rst, “some SOEs own the property managed by
Another issue attached to the conspicuous production internationally known hotel brands, which have many times
of high-end hotels is that, according to one analyst, they are brought faster returns than their core businesses.” Secondly,
often built to drive up the prices of attached o ces, residential “ine cient operations at many SOE-run hotels [makes]
apartments and retail spaces.13 potential buyers wary” and thirdly, “questions surrounding
existing hotel sta and tax liabilities are other hurdles to
Employee acquisition and retention continues to be potential sales.”19 In other words, while an SOE-owned hotel
problematic. According to “experts” quoted by China Daily, may be able to bend regulations and get away with poor
“compared with other countries, employee turnover at hotels e ciency, similar performance would be untenable for a
in China is very high.”17 private enterprise competing in the market.
Furthermore, as the industry as a whole expands the talent Following President Xi Jinping’s public push for
pool is not growing apace, leading to a situation in which government austerity, hoteliers “are taking steps to make their
“many hotels urgently need professional sta members, but properties look a little less fabulous” up to and including
are nding it even more di cult to recruit excellent employees
as the demand for hotel professionals increases.”17
*Admittedly, this gure comes from the abstract of a report, since its full contents are almost certainly beyond the scope of this ’White Paper’ and furthermore
cost in excess of 1,000 Euros.
200
