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China's Hotel Industry Faces Challenges and Opportunities

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Fairmont Peace Hotel on the Bund in Shanghai.

Hospitality News

New hotels are opening in China practically every day. Does the country face a surplus of rooms? Let's see what industry insiders have to say about the challenges and opportunities facing the country's hospitality industry.

 

China currently has an estimated 2.5 million hotel rooms. Does that mean that the Chinese hospitality market has reached its saturation point?

Not if you consider that the world’s most populous country has 1.3 billion people! On a per capita basis, China has just four hotel rooms for every 1,000 people, A.T. Kearney estimates.

To put that figure in context, there are 10 hotel rooms per 1,000 people in the United Kingdom and 20 hotel rooms per 1,000 people in the United States.

So there are definitely not too many rooms at the Chinese inn. The country still has plenty of room for growth.

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Lobby lounge of the Wanda Reign Chengdu hotel.

According to a report published by JLL, China’s domestic tourism market has been growing at an annual rate of 10% over the last decade.

Much of this growth is the result of rising incomes. China’s mushrooming middle class has reached an estimated 500 million, and it will continue to grow - perhaps tripling over the next 10 to 15 years.

But other factors have also been at play. Transport infrastructure has improved dramatically in recent years, making it easier to travel in China.

The nation’s highways now rank among the world’s best. High-speed railways have been built between key cities such as Beijing and Tianjin and Shanghai and Hangzhou. This makes even short weekend getaways more feasible.

Beijing Capital International Airport is now the world's busiest air field. Even second and third-tier cities boast excellent airports – even if flight delays are common.

Add to the mix an upgrading of tourist attractions such as temples and monasteries and historic neighborhoods.

China is not only increasingly attractive to domestic tourists. International visitors are finding it increasingly attractive, as well.

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Moon Gate Corridor at the Nuo Beijing.

Global hospitality chains have been beating a path to China's door, where they have to compete with an increasingly competitive domestic hospitality sector.

Still, the country's hotel industry faces challenges. While top level executives can be imported from abroad, the same cannot be said of mid-level management.

But there is a shortage of qualified domestic talent to fill mid-level management positions.

As for front-line staff, it is difficult to find entry level candidates fluent enough in English and other foreign languages to interact professionally with guests from other countries.

Many foreign visitors, in fact, complain of having to listen to staff practise their English, making them feel like unpaid language tutors.

Owing to their excellent training programmes, many hotels find that as entry-level staff get trained to a reasonable level, they are poached by other companies.

It wouldn't be so bad if they were poached by other hotels, keeping the talent within the trade. But they are usually recruited by other industries, which can offer higher salaries and better benefits.

Employers have actually been known to walk into hotel lobbies and ask staff for their CVs while on duty!

Round Table Discussion

Let's see what several industry insiders have to say about the challenges and opportunities facing China's hotel industry.

Ahct china Blaise Jing 2016
Blaise Jing, Regional Manager for China, Preferred Hotels and Resorts.

Blaise Jing – Regional Director for China, Preferred Hotels and Resorts.

Preferred Hotels and Resorts is the world’s largest independent hotel brand represents 22 distinctive independent properties.

The group has a cross section of hotels over four Collections – Legend, LVX, Lifestyle and Connect – in China’s key gateway cities of Beijing and Shanghai, as well as Guangzhou, Chengdu, Dalian, and other secondary cities.

What challenges does the hotel industry in China face?

One of the main challenges that the hotel industry is still grappling with for quite some time now is with Human Resources - attracting the right front-of-house talent who are conversant in English, to better enhance the stay experience of international guests.

How was business in 2016 compared to the year before?

2016 was a much better than year 2015, in terms of travel transactions and hotel development for our company.

What are your projections for this year?

Our goal is to maintain our current leadership position in the region, keep communication lines open with the hospitality community, and engage in dialogues that will create new dynamic alliances that will provide more unique independent hotels experiences in China for international travelers.

Do you have any plans for 2017?

Yes, we do have plans for development in 2017, particularly in the secondary cities.

We are currently positioned as the largest independent hotel representation company in China.The Swire Hotel Group and Wanda Group are our main hotel partners in the country.

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Water treatment in the interior of The Opposite House, a boutique hotel in Beijing.

Mark Passmore – General Manager of The Opposite House, a member of Preferred Hotels & Resorts - Legend Collection.

Part of Swire Hotel’s The House Collective series, The Opposite House opened in August 2008, just in time for the Beijing Olympics.

What challenges does the hotel industry in China face?

Hiring. As mentioned the hospitality industry relies heavily on manpower. For us, we hire based on a person’s attitude rather than his/her previous work experience.

So to find people with the right attitude may be challenging at times.

What about opportunities?

As China’s economy continues to be one of the world’s centres of attention, more and more businesses are interested to enter the country, which will be beneficial for the hospitality industry.

How was business in 2016 compared to the year before?

Despite the large number of competitors around and new hotels constantly opening in Beijing, 2016 was a fruitful year for The Opposite House.

In a saturated market, what sets us apart is our level of service and attention to guests.

As you may know, the hospitality business heavily relies on manpower, thus through a thorough hiring process and rigorous training we set ourselves apart.

What are your projections for 2017?

2017 is another exciting year for The Opposite House and the hospitality industry obviously.

We will be revamping three of our F and B outlets – Sureño, Village Café and Mesh Bar, and presenting to guests more delightful dining experiences at our award-winning Chinese Restaurant – Jing Yaa Tang.

We see lots of fashion and product launches happening in our event space – Bei Space. Beijing tourism is ever growing, which will have a positive impact on rooms.

Speaking of the hospitality industry in general, there are no doubts quite a number of new hotels will open in town, which I believe is a positive point, in a way all hotels work together to satisfy guests and constantly improve hospitality standards.

AHCT China  Adrian Rudin - General Manager of NUO Hotel Beijing
Adrian Rudin, General Manager, Nuo Hotels.

Adrian Rudin – General Manager, Nuo Hotels. Its flagship property, the Nuo Beijing, opened on 5 June 2015. It has 438 rooms and suites.

What challenges does the hotel industry in China face?

Oversupply of hotel rooms and mange quality and consistency is the key for China.

What about opportunities?

For a quality and value for money driven company there are always opportunities to grow.

How was business in 2016 compared to the year before?

We did manage to penetrate the market above expectations and  also managed to have very good customer feedback from Social Media platforms such as TripAdvisor. Also, we did manage to obtain 52 awards in 2016.

What are your projections for 2017?

We still have to open our Japanese Restaurant at Nuo Beijing and, of course, renovate our second property here in Beijing.

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Entrance to the Yuan Tea House at the Nuo Beijing.
People Philip Schaetz  Vice President  Marco Polo Hotels
Philip Schaetz – Vice President, Sales and Marketing, Marco Polo Hotels.

Philip Schaetz – Vice President, Sales and Marketing, Marco Polo Hotels.

A wholly owned subsidiary of The Wharf (Holdings) Ltd, Marco Polo Hotels currently operates 14 owned or managed hotels in Hong Kong, China, and the Philippines.

The group has four more hotels in the pipeline, including two new hotels scheduled to open in the next 12 months.

What challenges does the hotel industry in China face?

Attracting talent to the hospitality industry will remain the number one challenge we continue to face.

Therefore, our priorities are in talent retention and acquisition. For Marco Polo and Niccolo hotels, training and talent development are key priorities in order to ensure high employee satisfaction scores and position ourselves as an employer of choice.

The Niccolo brand, which seeks inspiration in the high end retail sector, which we already work closely with, enables us to position jobs in the hotels from a different angle and attract talent that normally may not consider pursuing a career in hospitality.

The challenge remains over supply in key cities. However, we are strategically opening new Niccolo properties in cities like Chongqing, Changsha, and Suzhou, where the luxury hospitality sector in fact is in need of additional supply.

Additionally, more and more new hotels are opening. The market is getting very competitive in first and second tier cities. 

What about opportunities?

With a huge population, domestic Chinese are now spending a lot of money on travel.

How was business in 2016 compared to the year before?

Business levels overall in China where at mixed levels. Some destinations saw tougher times than others, and the same is true for the Marco Polo hotel portfolio.

The big winners were Xiamen and the respective Marco Polo hotels but also Wuhan, where we saw a return in visitation growth.

Niccolo Chengdu was the big success; not only from a financial performance, but also with the highest guest satisfaction scores in the city rated by luxury travelers.

What are your projections for 2017?

We feel that 2017 will be an exciting year. There will be challenges derived from a continuous level of uncertainty in the global economic climate of course.

We will be opening our second Niccolo Hotel in China in Chongqing in August, which will enhance the Niccolo footprint further.

The hotel, like Niccolo Chengdu, will be nested in a destination complex, which will include a high end luxury and lifestyle shopping mall, high office towers, and residential buildings. So from our perspective, 2017 looks positive. 

The country’s economy will keep growing as it did in the past years. There will be more and more hotels opening in 2017 and thereafter.

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Daniel Wang, General Manager of Longemont Hotel Chengdu.

Daniel Wang – General Manager of Longemont Hotel Chengdu, a member of Preferred Hotels & Resorts – LVX Collection

The Longemont Hotel Chengdu opened on 1 October 2016, with 785 rooms and suites, targeting both business and leisure travelers.

What challenges does the hotel industry in China face?

The hospitality industry today is seeing more hotel franchise business models - from boutique inns and budget hotels to serviced apartments, etc., all of which are being regarded as the latest trends, influencing the diversified development of the hotel industry.

As a traditional brand hotel, we endeavor to continually enhance ourselves: by streamlining the development of hotels to ensure sustainability of revenue and profit generation, whilte harnessing the right talent to drive the spirit of innovation to support this industry’s long term development.

What about opportunities?

There are always new opportunities in all areas of tourism and the rapid development of the economy in China.

We must continue to harness the power and influence of digital marketing to differentiate ourselves and capitalize on business opportunities.

The future of the hotel industry also lies with sustainable and eco-friendly environmental practices.

What are your projections for 2017?

To create more brand awareness around Chengdu and the region in 2017.

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Piano in the lobby of Les Suites Orient, a boutique hotel in Shanghai.

David Low – Chief Executive Officer of Les Suites Orient, Bund Shanghai, a member of Preferred Hotels & Resorts – Lifestyle Collection

Les Suites Orient, located on the Shanghai Bund, was officially opened in 2010 with 168 rooms.

What challenges does the hotel industry in China face?

I see great challenges in Human Resources for China especially in the hospitality industry: there is a boom in room supply and high wages, but a only a small talent pool trained towork in the industry.

Challenges are great because China has been the international driver for hotel development for many years and features so heavily in the growth plans for all the large international operators.

What about opportunities?

Whenever there are challenges, there are opportunities and I see great opportunities in the Human Resources, domestic markets, and Chinese brands and the tourism boom with cities of over 1 million people.

Consumer products and services: currently, China is the biggest market for cars and many consumer products, including most luxury goods.

There will be more and more people moving from the countryside to the cities in China in the coming years.

Technology and Health Care services will improve when their income increases.

You can see an improvement in the health care systems with foreign investment and technology.

How was business in 2016 compared to the year before?

Thanks to the team at the hotel, business in 2016 has improved tremendously compared to previous years.

What are your projections for 2017?

My projections for 2017, will be similar to 2016 - to improve our ADR and the level of personalized service at the hotel for our guests.

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