China Tourist

Hotels see red

Some hoteliers no longer want five stars

Pangu w

The Burj Al Arab set new standards for luxury when it opened in 1999 in Dubai. Guests got a private butler and a small army of valets if they booked the Royal Suite (at the princely price of $18,716 a night, CNN reported).

The hotel was soon being described as “seven star” although its management distances itself from the rating, saying that it first emerged after a visit from a British journalist who penned an article about the Burj. (No such rating ‘officially’ exists but the label stuck.)

If the Gulf has a seven-star hotel, you can bet a Chinese hotelier wants one too. Step forward the Pangu 7 Star hotel in Beijing, which is housed in a dragon-shaped edifice facing the Bird’s Nest Olympic Stadium. Among its attractions: it’s fronted by 66 dragon heads made from ‘five million year old’ granite (the hotel’s website says the mythical beasts are designed to bring guests “double prosperity” during their stay).

But we’re guessing the Pangu 7 Star isn’t hosting many functions these days involving government officials. Instead they are shunning luxury hotels and their banqueting services – in response to an order from Xi Jinping that his bureaucrats avoid extravagance.

This has hit hotels’ bottom lines. One hotelier told WiC that food and beverage revenues are down over 25% at his venues.

But the thrift directive is also having some unexpected consequences, reports CBN. It spoke to Chen Miaolin, the entrepreneur boss of the high-end hotel chain New Century. He confirmed that his own takings were down 20%, as a result of cadres avoiding his five-star establishments. But some of his peers have come up with an unlikely solution, Chen said. Rather than champion their luxury status like the Pangu, they’ve been applying to drop a few stars from their ratings.

“I learned from the China Tourist Hotel Association that last year 56 five-star hotels requested a ‘lower’ star rating and many of those who were applying for five-stars suspended their applications,” Chen confirmed. “We had five of our own hotels ready to apply for a five-star rating but we decided to suspend them too.”

New Century has 64 hotels, of which 40 are currently five-star.

The manager of another luxury property told CBN that hoteliers were being forced into a major rethink about how they marketed themselves. “The government and state-owned enterprises have reduced conference and travel standards. Originally a manager’s standard of accommodation was Rmb600 ($98.98) per night, and now it may only be Rmb200. For conferences the room and board standard is Rmb450 to Rmb600, which means a large number of high-end hotels have lost business. Government and SOE banquet orders are almost zero.”

By dropping stars and reducing rates hotels are hoping to win back their government business. They also get the chance to shave costs down too. As one analyst pointed out, the classification system requires that five-star hotels offer amenities like swimming pools and Western restaurants. By abandoning a star or two, hotels can mothball some of their previous attractions, shedding staff and lowering expenses.

The commercial crisis at a number of five-star establishments hasn’t been helped by a glut of recent openings, a problem that WiC warned about in issue 98. Research firm STR Global calculates that China now has more than 650 five-star hotels and 691 more are scheduled to open in the next five years.

The 2013 China Hotel Industry Development Report shows that occupancy rates were already falling more than 9% in the early parts of last year, despite lower prices for rooms. The decline is likely to have endured over the remainder of 2013 and into this year too.

And that’s something that the Pangu 7 Star may be experiencing firsthand. Based on a seach on Booking.com, it has a few bargains on offer. A deluxe double room can be enjoyed this month for just Rmb2,389 a night, something of a steal compared to its seven-star cousin in Dubai…


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