BTG Group president Qiang Duan revealed that 60 Beijing five-star hotels suffered losses last year with vacancy rates reaching 40% and room rates spiraling downwards.
One observer thinks the woes five-star hotels have been facing recently indicate that moves to curb waste in official spending are taking effect, and hotels are shifting their focus to mass consumer market as consumption pattern changes.
Five-star rating loses its shine
Earlier, Beijing Finance Bureau excluded Beijing’s five-star hotels from its 2014-2015 conference venue procurement list that features 318 venues.
The latest star-rated hotels statistics released by the China Tourism Administration in August 2014 show that the 11,000 plus star-rated hotels in China recorded losses exceeding RMB2 billion in 2013, and five-star hotels’ RevPAR for that year fell almost 10%.
The Beijing Jinjiang Fuyuan Hotel in the Daxing district is the first five-star hotel built in Beijing and, in a bid to keep customers, became the first to relinquish its five-star status. Beijing College of Finance and Commerce Hotel Management research chief Hongsheng Cai said that Fuyuan Hotel’s desperate move was inevitable as the market demand is low for a luxury hotel that is not located in the city center.
Applications for five-star rating dropping
A Beijing Tourism Committee member said that the number of hotels applying for a four- and five-star ratings in 2014 was lower than in 2013.
The manager of one non-star-rated hotel said that the five-star rating process was complicated and time consuming, and the stringent requirements on facility standards raises operating costs. “The costs are very high to maintain a parking lot, Chinese and Western restaurants, a swimming pool and other facilities that aren’t used often,” he said.
Mr. Cai said: “The star rating is a standard to differentiate hospitality establishments for foreign visitors. The rating process is complex, stipulating conditions for refurbishing, equipment and facilities, but doesn’t necessarily reflect the actual guest experience.”
Public officials no longer filling hotel coffers
A Qunar hotel operations manager said: “The way China’s luxury hotels were relying on state conferences as a main source of revenue wasn’t in accordance with international industry practice. Mid- to high-level hotels used to reach full capacity just with public officials splurging on expense accounts. As they are rushing to fill vacancies with leisure travel customers now, the industry is finally on the path to healthy development.”
Hotels targeting the general public have had sustained growth in recent years and 15 of China’s economy hotel chains are in the top 30 Chinese corporations list, according to the China Hotel Industry Chain Operation Development Report.
One analyst said an increasing number of customers aren’t paying attention to star ratings when choosing a hotel, instead they can easily check out the hotel’s brand, service, special features, online user ratings to get an idea of what it offers.(Translation by David)
