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10.1177/0010880404273892
MAY 2005
153
CHINA
Strengths
China has witnessed the rapid development of its hotel properties over the past
two decades. The strengths of Chinas
hotel industry rest in (1) the growing popularity of China as a major international
business market and tourism destination,
(2) the diversity and quality of Chinas
hotel products, (3) the efforts to standardize operations and improve service quality, and (4) increased development by
global hotel corporations.
In the first instance, the growth of
hotels appealing to international tourists
has been fueled by aggressive economic
reforms in the past decade. This growth
has paralleled rapid national economic
expansion and the emergence of China as
154
MAY 2005
CHINA
Exhibit 1:
Hotel Development in China, 1990-2002
1990
2130
1991
2354
1992
2552
1993
2995
1994
3420
1995
4418
1996
5201
1997
5782
1998
7035
1999
10481
2000
7358
2001
8880
2002
0
2000
4000
6000
8000
10000
Number of Hotels
Source: China National Tourism Administration, The Yearbook of China Tourism Statistics (Beijing:
China Travel and Tourism Press, 2003).
Note: The year-2000 figures are not directly comparable to those of other years. Hotel data included both
star-ranked and nonstar tourism hotels in 2000 as the China National Tourism Administration changed its
reporting format in that year. Only star-ranked tourism hotels were reported in its annual statistical yearbook for 2001 and 2002.
MAY 2005
155
CHINA
Exhibit 2:
Hotel Ownership and Star-Ranking Distributions in China, 2002
Ownership
Hotels
State owned
5,061
Collective
893
Shareholding cooperative
172
Alliance
90
Limited liability
734
Limited liability shares
327
Private owned
556
Others
361
Foreign funded
279
Hong Kong, Macau, and Taiwan 407
Percentage
of Total
Rooms
Percentage
of Total
Beds
57.0
10.1
1.9
1.0
8.3
3.7
6.3
4.1
3.1
4.6
487,100
71,000
15,600
9,500
75,000
41,100
36,000
26,400
60,700
74,800
54.3
7.9
1.7
1.06
8.4
4.6
4.0
2.9
6.8
8.3
975,400
139,900
28,100
18,100
141,300
76,900
68,900
51,600
103,100
126,000
Beds
Star Ranking
Hotels
Percentage
Rooms
Percentage
5 Star
4 Star
3 Star
2 Star
1 Star
Total
175
635
2,846
4,414
810
8,880
2.0
7.2
32.1
49.7
9.1
64,900
143,500
346,500
306,000
36,400
897,300
7.2
16.0
38.6
34.1
4.1
102,400
248,400
680,000
622,100
76,500
1,729,500
Percentage
of Total
56.4
8.1
1.6
1.1
8.2
4.5
4.0
3.0
6.0
7.3
Percentage
5.9
14.4
39.3
36.0
4.4
Source: China National Tourism Administration, The Yearbook of China Tourism Statistics (Beijing: China Travel & Tourism Press,
2003), 7-8.
156
MAY 2005
CHINA
Exhibit 3:
International and Domestic Hotel Companies in China
Company
Hotels
120
41
40
24
Accor
Rujia Hemei Hotel Management Group
Hong Kong CTS Hotel Management Group
Shangri-la Hotels
Conifer International Hotel Group
China Travel Service Hotel Company
Starwood Hotels and Resorts
22
22
19
16
15
15
14
14
12
12
11
10
9
5
Hyatt Corporation
City, Country
Shanghai, China
Berkshire,
United Kingdom
Beijing, China
Washington, D.C.,
United States
Paris, France
Beijing, China
Hong Kong, China
Hong Kong, China
Hong Kong, China
Beijing, China
White Plains, New York
United States
Parsippany, New Jersey
United States
Beijing, China
Hangzhou, China
Hong Kong, China
Phoenix, Arizona,
United States
Changsa, China
Watford, Herts,
United Kingdom
Chicago, Illinois,
United States
Source: China Tourism News, February 26, 2003; and China Tourist Hotel Association (2004), data collected by personal interview in Beijing.
Note: Statistics are as of July 30, 2004, except for Accor, Gloria Plaza, Hilton, InterContinental, Oriental,
and Shangri-la, which are as of 2003; and Hyatt, which is as of 2002.
MAY 2005
Weaknesses
157
CHINA
158
MAY 2005
MAY 2005
CHINA
159
CHINA
Exhibit 4:
Hotel Financial Performance by Management Type, 2002
4-Star Hotels
5-Star Hotels
Domestic
Domestic
International
Chain
Independent International
Chain
Independent
Performance Management Management Management Management Management Management
Occupancy
ADR
RevPAR
71.4%
485
346
72.7%
366
266
67.9%
330
224
70.4%
727
512
74.6%
604
450
64.8%
518
336
Source: China Hotel Industry Study 2003 (Beijing: China Tourist Hotel Association, 2003).
Note: ADR (average daily rate, measured by rooms revenue divided by the number of rooms sold) and RevPAR (revenue per available room) were reported in Chinese yuan. As of this writing, the exchange rate between U.S. dollar and Chinese yuan is: $1:8.28.
160
MAY 2005
CHINA
Exhibit 5:
Comparison of Operation Performance by Management Type (in percentages)
4-Star Hotels
5-Star Hotels
Domestic
Domestic
International
Chain
Independent International
Chain
Independent
Management Management Management Management Management Management
Department
revenues
Rooms
60.7
Food
23.9
Beverage
5.1
Catering
2.2
Telephone
0.9
Spa
0.9
Rent
3.9
Other
2.9
Total
100
Department
expenses
Rooms
25.7
F&B
74.3
Telephone
117.4
Spa
57.1
Rent
12.4
Other
60.1
Total
42.3
Undistributed
expenses
Administrative 9.7
Marketing
4.4
Energy
9.0
POM
4.7
Total
27.9
IBFCMF
29.7
Management fee
(basic and
incentive)
3.0
Fixed charges 3.8
EBITDA
23.3
56.6
23.6
4.9
2.7
0.8
1.4
9.8
5.8
100
44.4
31.2
6.0
4.7
0.3
4.9
9.7
6.4
100
55.2
22.3
6.8
5.0
0.8
1.3
4.1
5.0
100
52.1
23.7
5.5
4.5
0.1
5.5
8.1
3.8
100
44.7
31.6
5.4
4.7
0.6
3.9
8.6
3.8
100
25.0
80.8
190.5
54.2
9.4
74.9
42.4
23.7
71.2
177.7
56.8
20.7
93.3
44.6
19.4
63.5
101.8
52.0
13.3
32.4
35.6
19.1
69.3
101.2
29.0
91.1
38.9
19.6
65.3
148.7
38.4
25.6
127.8
43.0
12.8
2.9
6.8
4.4
22.6
35.0
15.3
2.0
7.3
7.9
28.4
27.1
8.4
5.4
7.4
4.1
25.3
39.0
13.4
2.0
6.7
4.0
23.4
37.8
11.3
2.4
7.2
5.6
25.3
31.8
3.1
6.4
27.9
6.7
12.1
13.5
3.5
6.3
30.4
3.0
10.5
26.5
3.5
7.8
23.5
Source: China Hotel Industry Study 2003 (Beijing: China Tourist Hotel Association, 2003).
Note: Corporate income taxes levied by the Chinese government are as follows: 33 percent for taxable income greater than 100,000,
27 percent for taxable income between 30,000 and 100,000, and 18 percent for taxable income less than 30,000. F&B = food and
beverage; POM = property operation and maintenance; IBFCMF = income before fixed charges and management fees; EBITDA = earnings before income tax, depreciation and amortization.
MAY 2005
161
CHINA
162
Hotel Reforms
and Opportunities
MAY 2005
MAY 2005
CHINA
163
CHINA
164
MAY 2005
28
MAY 2005
CHINA
165
CHINA
Threats
166
Implications for
Future Development
MAY 2005
CHINA
Exhibit 6:
SWOT (Strengths, Weaknesses, Opportunities, and Threats) AnalysisChina Hotel
Reform
Strengths
Weaknesses
State ownership
Debt problem
Unprofitable operations
Inefficiency in management
Opportunities
Hotel reform
Hotel appraisal and valuation
Hotel real estate market
Hotel brand development
Mixed-use projects
Education and training
Threats
Overprovision
Potential economic slowdown
Regional political tensions
Intensified competition (both international and domestic)
MAY 2005
167
CHINA
168
2. Jones Lang LaSalle Hotels, Chinas Hotel Investment Market (New York: Jones Lang
LaSalle Hotels, 2003).
3. Ray Pine, Chinas Hotel Industry: Serving a
Massive Market, Cornell Hotel and Restaurant Administration Quarterly 43, no. 3 (June
2002): 61-70.
4. World Tourism Organization, Tourism Highlights, Edition 2003 (Madrid, Spain: World
Tourism Organization, 2003).
5. The sharp drop in the number of hotels from
2000 to 2001 was due to changes in statistical
reporting by the China National Tourism Administration (CNTA). In 2000, CNTA changed
its compilation method for hotel statistics by
counting both star-ranked and nonstar tourism
hotels. However, CNTA soon realized the difficulty and complexity of accurately counting nonstar hotels throughout China because
of the multifunctional uses of these properties.
Since 2001, CNTA returned to reporting only
star-ranked tourism hotels in its statistical
yearbook.
6. CNTA, The Yearbook of China Tourism Statistics (Beijing: China Travel and Tourism Press,
2003).
7. For detailed information on hotel star ranking
system, see Larry Yu, Seeing Stars: Chinas
Hotel Ranking System, Cornell Hotel and
Restaurant Administration Quarterly 33, no. 5
(October 1992): 24-27.
8. Peoples Daily, China Issues Hotel Regulation, April 2, 2002, p. 3.
9. Chinas Jin Jiang Readies for Next Chapter,
Hotels, July 2004, p. 28.
10. Ray Pine, Hanqin Qiu Zhang, and Ping-Shu Qi,
The Challenges and Opportunities of Franchising in Chinas Hotel Industry, International Journal of Contemporary Hospitality
Management 12, no. 5 (2000): 300-307.
11. Peter S. Goodman, Loans Feed Inflation in
China, Regulators Say, Washington Post,
March 12, 2004, pp. E1, E2.
12. Ibid., E2.
13. Dexter Roberts, Worrying about China, Business Week, January 19, 2004, pp. 28-31.
14. Wei Xiaoan, On State-Owned Hotel Enterprise
Reform: A Macro Analysis, China Travel and
Tourism Press, March 3, 2004, p. A9.
15. Li Jianwei and Yu Ming, The Effective Fluctuation and Its Impacts on the Chinese Economic
Growth, World Economy 11 (2003): 21-34.
MAY 2005
16. Zhang Xiuli and Gu Huimin, The Recapitalization of Olympic Hotel, Hotel Modernization 2, no. 2 (2003): 20-23.
17. Ibid.
18. Wang Zihua and Chen Guangbing, An Analysis of SARSs Impact on Tourism Development
in China, Travel and Tourism Economy 8
(2003): 65-66.
19. Bai Rendong and Li Guojun, Two Hospital
Management Groups Purchased Adjacent Hotels: Failing Hotels Rescued, Beijing Business
Today, February 18, 2004, p. A13.
20. Larry Yu, Critical Issues in Chinas Hotel Industry, in Tourism in China, ed. Alan Lew,
Larry Yu, John Ap, and Guangrui Zhang (New
York: Haworth Hospitality Press, 2003), 12941; Wei Xiaoan, On State-Owned Hotel Enterprise Reform; and Lu Ju, Models for Reforming City-Owned Hotels in Suzhou, China
Travel and Tourism Press, February 18, 2004,
p. A9.
21. Lu, Models for Reforming City-Owned Hotels
in Suzhou, A9.
22. Ibid., A9.
23. Bai and Li, Two Hospital Management Groups
Purchased Adjacent Hotels, A13.
CHINA
24. Ibid.
25. Wei Xiaoan, On State-Owned Hotel Enterprise
Reform.
26. Sally Wolchuk and Mary Scoviak, Hotels
325, Hotels, July 2004, pp. 36-52.
27. Lu, Models for Reforming City-Owned Hotels
in Suzhou, A9.
28. Jones Lang LaSalle Hotels, Chinas Hotel Investment Market, 8.
29. Lu, Models for Reforming City-Owned Hotels
in Suzhou, A9.
30. Bai Rendong and Wang Dongliang, Capital
Travel Corporation Raising 1-Billion Yuan to
Build Beijing Palace as Command Center for
Beijing Olympic Games, Beijing Business Today, February 19, 2004, p. A1.
31. Ken Moritsug and Tim Johnson, Possible
Slowdown in Chinas Economy Has Global
Impact, Knight Ridder Newspapers, May 27,
2004, p. 1; and The Economist, Is the Chinese
Economy Overheating? November 13, 2003,
p. 12.
32. Jiang Du, Reforms and Development of Higher
Tourism Education in China, Journal of
Teaching in Travel and Tourism 3, no. 1 (2003):
103-13.
MAY 2005
169