Keywords: luxury hotel sector, China,
Traditionally the luxury hotel sector in China has benefitted
enormously from officials' expenditure on functions and
hospitality. Recent reports, however, indicate that government
policies and new rules and regulations restricting officials'
hospitality expenditure may be having a very serious impact on this
The "Eight Stipulations" for improving officials'
working style and tightening relations with the people were
finalised by the Political Bureau of the Central Committee of the
Communist Party of China (CPC) in December 2012. Since then, the
PRC central government has promulgated a number of regulations to
implement the Eight Stipulations, aimed at controlling government
spending more strictly and curbing extravagance.
These regulations include, among other measures, the
Administration Measures for Conference Expenses of Central and
and the Administration Measures for Travel Expenses of Central and
both of which took effect on 1 January 2014.
According to the Measures for Conference Expenses, conferences
of central and state organs cannot be held in five star hotels
unless those meetings are approved by and convened in the name of
the Central Committee of the CPC and the state council.
Furthermore, when conferences have fewer than 50 attendees, all of
whom are local, they should in principle be held in the
organiser's meeting room rather than in a hotel, and no
accommodation can be arranged for the attendees. The measures also
prohibit the use of upscale suites as conference accommodation and
the serving of expensive dishes and liquor as part of conference
The Measures for Travel Expenses stipulate that when travelling
on official business, only officials at ministry level
(部级) or equivalent positions can stay in junior
suites, while other officials at and below department and bureau
level (司局级) can only stay in single or
standard rooms. The Ministry of Finance will also issue limits on
the amounts that officials travelling on business are allowed to
pay for accommodation in different locations.
The China hotel business has certainly been affected as a result
of the above campaign, especially five star hotels. Reports
indicate that this is particularly the case for those five star
hotels in third- or fourth-tier cities which are more dependent on
government business. High-end restaurants and the high-end liquor
market are also affected. Press reports appearing late in 2013
claimed that more than 50 five star hotels have requested a
downgrade in their rating, and many more hotels which had been
contemplating applying for a five star rating have postponed their
applications in an effort to preserve government business. It has
also been reported that some high-end hotels are providing low-cost
services including buffet and group-purchasing services in response
to the decline of business. Of course, for many years, hotels have
aspired to be rated five star, and some hotels on major sites have
even been "required" to be five star as a condition set
by the government to secure the Land Grant. An awkward tension has
therefore arisen for some hotel owners/developers.
It is yet to be seen exactly how dramatic the effect of these
policies will be and in particular if any high-end hotels or
restaurants will be forced to close as a result of this campaign.
However it is clear that the government's policies are having a
significant impact on F&B revenues for luxury hotels in the
country. This is no storm in a tea cup (or wine glass); it is
another real problem for some luxury hotels in China at a time when
many hotels are already facing challenging market conditions.
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issues and developments of interest. The foregoing is not a
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