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Hospitality industry goes along with trends

By Ding Qingfen (China Daily)
Updated: 2008-05-19 11:35

But unlike the White Swan, Jian'guo employed an international hotel group, Hong Kong Peninsula Hotels, to manage its operation, the first to do so.

According to Chris Lu, general manager at New Otani Chang Fu Gong Hotel in Beijing who was appointed by the then tourism administration to join Jian'guo in 1981 and started as vice-director of the food and beverage department, the Peninsula brought in and applied an extremely strict training system. The hardcore hospitality education process went from hiring people to training them and stirred up strong opposition among the local employees.

"Many believed it was an insult to be pressured so much to keep smiling all the time, to stand up straight continually, and to speak fluent English," he says. "They grumbled that it was absurd to spend so much of the hotel's reserves (3-5 percent of the revenues) on the Peninsula group," says Lu.

But the attitude changed when the hotel showed robust growth, gaining 1.1 million yuan even in the first seven months, despite the high room rates, twice of that of the Beijing Hotel. And the employees' salary was also attractively high, twice to three times above the average.

Jian'guo's success stimulated many other hotel property owners to follow suit in partnering with international hotel groups.

The US-based Sheraton Hotels & Resorts (Sheraton) was the second after the Peninsula that was invited. Sheraton's first management deal in the mainland was the Great Wall Sheraton Hotel, located along the East third-ring road in Beijing's CBD. The hotel had originally opened in 1983, but its business was poor until 1985 when the owner contacted Sheraton and both sides signed a management contract. And the business recovered very soon.

Following the Sheraton came in the United Kingdom-based International Hotels Group and Hong Kong-based Shangri-La in 1984, the French Accor in 1985 and the US-based Hilton in 1988. Shangri-La was one of the few that held equity in most hotel properties, but since the 2000s the group also began to turn shift to the management business.

In the 1980s, to accommodate the growing foreign travelers, a batch of hotel properties besides the eight officially appointed ones were erected around China's major cities.

But the industry was in its infancy, and the majority of the hotels were under the management of the Chinese who were still groping their way ahead.

To standardize and improve the facilities and services, China National Tourism Administration, in 1988, issued the "star hotel rating system", which signaled that the local industry had entered a new era when hotels were defined and rated by stars.

Room oversupply

Driven by China's economic rise, especially from 1996 to 2000, real estate developers set off a hotel building wave where the numbers hit historical highs, though the industrial revenue numbers fell to record lows.

From 1996-2000, also China's Ninth-Five Year Plan period, the GDP (gross domestic product) enjoyed an annual growth rate of 8.1 percent. Encouraged by the high return on investment of 20 percent in the hotel business, both State-owned institutions and private ones swarmed to hurl themselves into building hotels.

By the end of 1990, the number of hotels in the mainland rose to 1,987 from 203 in 1980, but the figure rocketed up to 10,481 in 2000 and the hotels possessed a total of 948,200 rooms.

About 354,000 of the rooms were added during the 1996-2000 period, and the annual growth of rooms was 12.39 percent, which was, however, three times of the growth of hotel guests nationwide over the same period, standing at 4 percent.

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