The hotel industry experiences a continually growth since years. Important factors and boosters for this development are the high substantial economic growth with an average GDP of 8 percent and within the last years the hosting of the Olympic Games in Beijing in 2008 and the World Exposition in Shanghai in 2010 (Zhang, Cai, & Kavanaugh 2008: 62). Currently exist 288 five star, 1.307 four star, 4.747 three star and more than 6.500 one or two star hotels. The majority of the hotels are state-owned and in the middle and low class segment. Apart from the centres Beijing and Shanghai also cities as Tianjin, Guangzhou, Shenzhen and Sanya are interesting for development (Business Monitor International Ltd. 2009: 20 f.). Within the coming years the domestic travellers will reach an enormous number and be the most important target group. To satisfy these travellers further development, especially in the budget segment (low and middle class), are necessary throughout the country.

In order to analyse where the future development will lead to and who are going to be the major players in this development, the needs and preferences of the future clients have to be taken into consideration. The domestic travellers in this context prefer one till three star hotels of local chains or independently operated hotels, because they prefer quality service, attention and respect, which is highly available and known in Chinese owned hotels (Hua, Chan & Mao 2009: 71). International chains are maybe known for their brand globally, but not widely among Chinese travellers and though have problems to implement themselves. As well the prices make a big ratio in choosing a hotel among domestic travellers.

International chains as Starwood Hotels & Resorts, Accor Group, Raffles Holding, InterContinental Hotels and Marriott are still interested in this emerging market and try to be part of this interesting and profitable market and are thus competing with local chains as Jinjang International Hotel Development and Shangri-La Asia (Business Monitor International Ltd. 2009: 21 f.). In the beginning of the market introduction of the international chains, high class hotels (4 or 5 stars) were build or incorporated, currently their focus lays on the future market of domestic travellers in the low or middle class segment. To be able to have a share in this growing market the hotel chains try to implement internationally successful brands in this segment (e.g. Ibis, Hotel Inn Express). Mostly problematic in this implementation of international chains are the primarily diverse structure of ownership in locally existing hotels and the sceptical approach towards western hotel management structure (Pine & Pingshu 2004: 466 f.).

Latest the structure of state-owned hotels is still dominant. 64 % of the total hotels and 61 % of the total beds are owned by state, mostly owned by several government-agencies which represent different ideas and complicate the process of implementing new ideas or renovations especially in regard of international management contracts. These hotels as well mostly lack a strategy in management and focus more on daily operations and neglect at the same time branding, corporate culture and innovations which leads to a less successful hotel concept (lower occupancy rates, lower annual average revenue per room) than international chains. The incorporation of state-owned hotels into international management contracts (franchise, consortia) is not being totally acknowledged due to a fear of losing benefits by course of chain operation, more stakeholders being involved or ineffective monitoring of hotel management after contracting (Cai 2004: 40 f.).

In regard of these arguments the biggest challenge in the near future will be to convince local actors from the benefits of a cooperation with international chains and players. This can be by illustrating the positive performances of multinational chains in the Chinese market or the benefits foreign investors receive from the local government (taxation, tariff, foreign exchange, pricing, human resources policies etc.). Beyond, the conquering of the budget market is an important approach and will be most profitable by local and international chains in the future.

Sources

Business Monitor International Ltd. (2009): China Tourism Report Q4 – Market Overview- Hospitality. Retrieved from Hospitality and Tourism Complete.

Cai, L.A. (2004): State-owned Economy and Budget Hotels in China – from Commodity to Brand. Asia Pacific Journal of Tourism Research, 9 (1): 29-42.

Hua, W., A. Chan & Z. Mao (2009): Critical Success factors and Customer Expectation in Budget Hotel Segment – A Case Study of China. Journal of Quality Assurance in Hospitality & Tourism, 10: 59-74.

Pine, R. & Q. Pingshu (2004): Barriers to hotel chain development in China. International Journal of Contemporary Hospitality Management, 16(1): 37-44.

Zhang, J., L.A. Cai & R.R, Kavanaugh (2008): Dimensions in Building Brand Experience  for Economy Hotels – A Case of Emerging Market. Journal of China Tourism Research, 4: 61-77.