Page 284 - 2017 White Paper
P. 284
7 White Paper on the Business Environment in China
As the market continues to develop, however, Following President Xi Jinping’s public push for
international brands are increasingly looking to cater their government austerity, hoteliers “are taking steps to make
experiences to Chinese guests both in China and abroad. their properties look a little less fabulous” up to and
At the “21st Century Hotel Industry Summit” held in 2012, including attempting to remove stars from their 5-star
Tourism Management director He Jianmin from the ratings in a bid to “win back business from politicians”
Shanghai University of Finance and Economics told China (Arredy and Wong 2014).
Daily that some international brands—including Accor,
InterContinental Hotels Group and MGM Hospitality— “Among the about 700 five-star hotels in China”, writes
have already created localized brands specifically for the The Wall Street Journal, “average occupancy sagged five
Chinese market (Lu 2012). percentage points in the year to mid-2013, to 50 percent,
according to government figures cited in China Tourism
The appeal of launching local-styled brands is not News. The figures show room revenue off 11 percent
limited to the Mainland, either; it was reported that there in the period, while dining receipts plunged nearly 19
will be “88 million Chinese travelers overseas by 2015”; percent” (Arredy and Wong 2014).
other Summit attendees sagely agreed that “a custom
hotel brand designed for China is also an effective way Somewhat stiflingly, the China Tourist Hotel
to gain Chinese customers who travel abroad” (Lu 2012). Association—the government agency that hands out the
stars—says that, “there’s no such thing as ‘downgrading
Still, it would seem that at least in the top segment of stars’”. If five-star properties choose to change their
the market existing international brands are faring quite ratings, says the association, they will be considered
well already: a China Tourism Academy report found that unrated instead (Arredy and Wong 2014).
by the end of 2010 “nearly 70 international hospitality
brands from 41 countries and regions” were “managing Beijing’s new-found austerity has not threatened more
about 20 percent of the country’s top-end hotels and tourism-oriented projects, however. After a brief delay,
taking 80 percent of the profits” (Wang 2012). the $5 billion Chimelong Hengqin Bay resort and theme
park (Master 2013) was scheduled to open on January 14,
One culprit for the spectacularly poor competition 2014. Located near Macau, the project features a roller
from Mainland hotel companies in terms of profitability coaster, a whale shark tank and a lavish 1,888-room hotel
is the lingering presence of non-hospitality-oriented (Macau Daily Times 2014).
state-owned enterprises in the sector: despite Minister
Li Rongrong of the State-owned Assets Supervision and “While some extravagant infrastructure projects
Administration Commission ordering SOEs to divest of in China have turned into white elephants”, explains
“non-core hotel assets” in 2003, nearly a decade later Reuters, “the odds are on Hengqin’s side largely due to
“some 2,000 hotels valued at trillions of yuan remain the support of the Beijing government and the island’s
under SOE ownership” (Yang and Li 2012). proximity to the millions of tourists who throng to Macau
every year” (Master 2013).
Although this brazen disobedience to a ministerial-
level official is somewhat surprising, China Daily reports After several tough years in which the sector reportedly
several reasons why SOEs may not want to divest so became “a victim of its own ambition”, rising domestic
quickly of their hotel assets: first, “some SOEs own the tourism is bringing about a “welcome reversal” for
property managed by internationally known hotel brands, China’s hotels in 2015. Third quarter RevPAR – an industry
which have many times brought faster returns than their measure of occupancy and daily room rates – grew
core businesses”. Secondly, “inefficient operations at 0.3% year-on-year, the first positive result in four years.
many SOE-run hotels [makes] potential buyers wary” and In Beijing, demand for high-end hotel accommodation
thirdly, “questions surrounding existing hotel staff and is growing almost twice as fast as supply – a noticeable
tax liabilities are other hurdles to potential sales” (Yang change for a sector once plagued by overexpansion,
and Li 2012). In other words, while an SOE-owned hotel oversupply, and external forces such as the national
may be able to bend regulations and get away with poor anti-corruption campaign which has helped to suppress
efficiency, similar performance would be untenable for a demand for luxury accommodation.
private enterprise competing in the market.
284
As the market continues to develop, however, Following President Xi Jinping’s public push for
international brands are increasingly looking to cater their government austerity, hoteliers “are taking steps to make
experiences to Chinese guests both in China and abroad. their properties look a little less fabulous” up to and
At the “21st Century Hotel Industry Summit” held in 2012, including attempting to remove stars from their 5-star
Tourism Management director He Jianmin from the ratings in a bid to “win back business from politicians”
Shanghai University of Finance and Economics told China (Arredy and Wong 2014).
Daily that some international brands—including Accor,
InterContinental Hotels Group and MGM Hospitality— “Among the about 700 five-star hotels in China”, writes
have already created localized brands specifically for the The Wall Street Journal, “average occupancy sagged five
Chinese market (Lu 2012). percentage points in the year to mid-2013, to 50 percent,
according to government figures cited in China Tourism
The appeal of launching local-styled brands is not News. The figures show room revenue off 11 percent
limited to the Mainland, either; it was reported that there in the period, while dining receipts plunged nearly 19
will be “88 million Chinese travelers overseas by 2015”; percent” (Arredy and Wong 2014).
other Summit attendees sagely agreed that “a custom
hotel brand designed for China is also an effective way Somewhat stiflingly, the China Tourist Hotel
to gain Chinese customers who travel abroad” (Lu 2012). Association—the government agency that hands out the
stars—says that, “there’s no such thing as ‘downgrading
Still, it would seem that at least in the top segment of stars’”. If five-star properties choose to change their
the market existing international brands are faring quite ratings, says the association, they will be considered
well already: a China Tourism Academy report found that unrated instead (Arredy and Wong 2014).
by the end of 2010 “nearly 70 international hospitality
brands from 41 countries and regions” were “managing Beijing’s new-found austerity has not threatened more
about 20 percent of the country’s top-end hotels and tourism-oriented projects, however. After a brief delay,
taking 80 percent of the profits” (Wang 2012). the $5 billion Chimelong Hengqin Bay resort and theme
park (Master 2013) was scheduled to open on January 14,
One culprit for the spectacularly poor competition 2014. Located near Macau, the project features a roller
from Mainland hotel companies in terms of profitability coaster, a whale shark tank and a lavish 1,888-room hotel
is the lingering presence of non-hospitality-oriented (Macau Daily Times 2014).
state-owned enterprises in the sector: despite Minister
Li Rongrong of the State-owned Assets Supervision and “While some extravagant infrastructure projects
Administration Commission ordering SOEs to divest of in China have turned into white elephants”, explains
“non-core hotel assets” in 2003, nearly a decade later Reuters, “the odds are on Hengqin’s side largely due to
“some 2,000 hotels valued at trillions of yuan remain the support of the Beijing government and the island’s
under SOE ownership” (Yang and Li 2012). proximity to the millions of tourists who throng to Macau
every year” (Master 2013).
Although this brazen disobedience to a ministerial-
level official is somewhat surprising, China Daily reports After several tough years in which the sector reportedly
several reasons why SOEs may not want to divest so became “a victim of its own ambition”, rising domestic
quickly of their hotel assets: first, “some SOEs own the tourism is bringing about a “welcome reversal” for
property managed by internationally known hotel brands, China’s hotels in 2015. Third quarter RevPAR – an industry
which have many times brought faster returns than their measure of occupancy and daily room rates – grew
core businesses”. Secondly, “inefficient operations at 0.3% year-on-year, the first positive result in four years.
many SOE-run hotels [makes] potential buyers wary” and In Beijing, demand for high-end hotel accommodation
thirdly, “questions surrounding existing hotel staff and is growing almost twice as fast as supply – a noticeable
tax liabilities are other hurdles to potential sales” (Yang change for a sector once plagued by overexpansion,
and Li 2012). In other words, while an SOE-owned hotel oversupply, and external forces such as the national
may be able to bend regulations and get away with poor anti-corruption campaign which has helped to suppress
efficiency, similar performance would be untenable for a demand for luxury accommodation.
private enterprise competing in the market.
284
