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China Focus: Starred hotels lose shine amid China's austerity drive

By Xinhua writers Cheng Lu and Cheng Yunjie

HANGZHOU, Jan. 21 (Xinhua) -- The five-star rating, once a halo

guaranteeing profits for Chinese luxury hotels, is losing its

glamour as the country's ruling party bans consumption in upscale

accommodations at public expense.

Chairman Chen Miaolin of the New Century Tourism Group based in

east China's Zhejiang Province said he had instructed his five

four-star New Century Hotels to table their plans for an upgrade to

five stars under pressure from shrinking turnover.

Chen, who doubles as the vice president of the China Tourism

Association, said that a total of 56 five-star hotels sought to

downgrade their ratings to four stars in 2013, while many more

lower-rated hotels suspended their applications for the top-notch

rating.

The Chinese mainland currently has more than 4,000 starred

hotels. Of the total, 680 are rated at five stars.

Citing initial estimates by the association, Chen said that the

hotel industry reported a decline of 25 percent in its aggregate

business turnover in 2013. About 20 or more hotels were closed down

each month.

Another report released by the China Tourist Hotel Association

shows that in the first half of 2013, the average lodging rate of

China's hotels with three-star ratings or higher dwindled by six

percentage points to 53 percent from the same period in the

previous year.

The average revenue generated by hotel catering businesses

dropped by 17.2 percent, while that of meetings and other events

dropped by 17.8 percent. Five-star hotels were worst hit as their

total revenues declined by 14 percent, more than all other types of

hotels, said the report.

Chen attributed the cold front striking China's luxury hotels to

the ban imposed by the Communist Party of China (CPC) on official

consumption at five-star hotels at public expense.

Since Xi Jinping took the helm of the CPC in November 2012, the

Party has made a series of detailed regulations to uproot

bureaucratic and extravagant work styles among government workers,

such as requiring officials to travel with smaller entourages,

simplifying receptions and practising frugality.

The austerity drive hasn't waned over the past year. As the

Chinese Lunar New Year on Jan. 31 approaches, the Party released

another notice ordering beefed-up supervision and welcoming

tip-offs from citizens and media about excessive spending and gifts

before and during the week-long holiday.

Chen didn't expect the drive to deal such a heavy blow to the

hotel industry.

He said the New Century Tourism Group, parent group to 64

hotels, including more than 40 with starred ratings, had agreed to

provide management services for 75 new hotels once they were put to

operation.

Now, a dozen of them have seen their construction suspended. For

the others, construction has seriously fallen behind their original

schedules, Chen said.

To remedy the situation, Chen said one of his four-star hotels

in Tianjin had been shut down and would seek to reopen as a nursing

home after the Spring Festival.

Chen was not the only hotel manager in China seeking to

reposition his business while the hotel industry struggles.

Yang Xiaowei, a sales manager at Lijingwan International Hotel

in Beijing, said that many government organizations had canceled

their traditional year-end banquets under the pressure of

austerity.

"High-end restaurants and hotels are really suffering, as nearly

60 percent of our turnover used to come from governmental

departments and state-owned enterprises," said Yang.

Last year, the hotel posted less than four million yuan (655,738

U.S. dollars) in business generated at public expense, compared to

over six million yuan in 2012.

But Yang does not see voluntary downgrading as a sustainable

solution for luxury hotels to survive.

"We put our bet on private consumption. We have offered more

discounts to the public and strived to increase our visibility on

the Internet," she said.

Zhang Yan, a sociology researcher with the Shaanxi Provincial

Academy of Social Sciences, also agreed that it is time for the

Chinese hotel industry to reduce its dependence on public

expenses.

"I think the Party's crackdown on corruption and extravagance

will advance in the Year of Horse. Luxury hotels and restaurants

will have to face the lingering cold air," Zhang said.

"They have to innovate their operations and marketing activities

to become more appealing to individual consumers. Meanwhile, as too

many hotels exist in the market, mergers and acquisitions are

indispensable this year," she said. Enditem (Xinhua correspondents

Wei Hui and Wei Donghua from Zhejiang contributed to the story)

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