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China’s five-star hotels are desperate for lower ratings

Profile Photo By: H L
January 24, 2014

China’s five-star hotels are desperate for lower ratings

Hospitality News: Chinese waitress dressed neatly in red cheongsam and white glove, standing in a row
Chinese waitress dressed neatly in red cheongsam and white glove, standing in a row

After local governments in China began prohibiting government officials from spending money at five-star hotels last year, dozens of top-rated hotels took steps to preserve their government business?by voluntarily dropping at least one star.

?I?ve been in the business for decades and I?ve never seen this before,? Chen Miaolin, chairman of the New Century Tourism Group, told the China News Agency. He was quoted in two official news releases describing star-reduction attempts by 56 hotels. The hotel industry in China is rated by the state tourism bureau and other government agencies, and five stars is the highest rating.

As the Communist Party led by President Xi Jinping continues a campaign against corruption and government extravagance, some top-of-the-line hotels are feeling the pain. Revenue declined 18 percent last year at Hangzhou-based New Century, which operates 64 hotels around China, including 40 with five-star ratings. In October, Chen was quoted in a Hong Kong paper saying New Century?s income from government agencies had fallen to less than 3 percent of overall catering revenue?down from 15 percent?because of Beijing?s anti-extravagance measures.

One of the company?s hotels in Nanjing responded by proposing to give up all its stars, Chen said, and five others shelved new ratings applications. It?s not clear whether the hotels? prices have changed; the ban is aimed only at their ratings, not their prices.

New Century?s guests have traditionally included a long list of top Chinese officials, from governors to generals to President Xi himself, an internal company newspaper shows. In 2009, Xi, then the vice president, stayed at the five-star New Century Grand Hotel in Kaifeng, in Henan province. He chose a nonsmoking lake-view room over a president?s suite, the company newspaper said.

Former Henan Governor Lu Zhangong stayed at the same hotel at least three times, including once on a cold day in 2010 to meet with low-income locals. The hotel said it arranged to have the climate control adjusted step by step along Lu?s walking route so he wouldn?t feel a sudden change of temperature. The governor came back three months later to host a reception for 26 generals, each attended by a waiter.

So far the Kaifeng hotel is keeping its five stars. Chen, New Century?s chairman, said the five-star ban hasn?t solved the problem of government extravagance. Government officials that used to book them are now making more use of the canteens, or cafeterias, that serve their agencies?some of which look even more luxurious, he said.

Source Bloomberg Businessweek,

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