ITB 2024 Special Reporting
Owners Influence on Hotel Management in China.
By René J.M. Schillings ~ TOP Hoteliers
Wednesday, 23rd December 2009
It's not unique to China that most hotels are owned by companies that do not operate these hotels and/or do not have the specific experience and know-how how to professionally manage a hotel operation.

For this, more and more hotel owners sign up management contracts with established hotel management companies, be they international or domestic, long time in China or new comers.

When we, TOP Hoteliers, recruit for a hotel in China, both internationally managed, or local managed, we consider the details about the ownership, the ownership involvement and the owner's history and experience

What is unique to China is that the average hotel owner in China is a relatively newcomer to investment in long term projects such as a hotel. Originally, since the founding of the People's Republic of China all hotels, hostels, guest state houses and so on were owned by the Government.

Most of the hotels that date from this area were often build for political reasons, special events, or to boost regions. This is almost a closed chapter in China, but it's the same government bodies that still control large assets of hotel properties, even when the old state-owned hotel disappeared and a new glitzy international managed hotel rose up in its place.

The first international hotel companies that entered China in the early and mid-80's were still joint-ventures with mostly all-powerful Municipal Governments and Ministries, and even China's state monopolies such as Oil, Banks, Railways, yes even The People's Liberation Army owned most of these hotels.

In the 1990's when private entrepreneurs started building their emporiums, these assets from the government were largely privatized/ bought up, and of course due to available land and capital, new projects were developed. Today the hotel owners in China can be described as either self-made billionaires who made their fortunes with real-estate, manufacturing or trade, or semi-privatized consortiums, cut loose from the old state-owned enterprises but run by a board of directors, acting like a cooperative.

In all these cases, their choice to invest and own a hotel is not driven by a desire to operate the perfect hotel, but to make a return on investment, for ulterior reasons. A very popular reason to put up a hotel in China is the mixed-use development where a whole area or complex is built up, including offices, housing, shopping malls, leisure park, and to add value and prestige, a hotel is fitted in, almost as an afterthought.

And there are those projects in China were hotels are purely built as part of a prestige project, to show off wealth, power, or the economic development of a certain region. Feasibility study is only a marginal part of such decision to build a hotel. The choice of a particular brand is often more a ‘fashion' statement than a concise choice for this operator or that, based on proven results.

This approach quite often clashes with the mindset of professional hoteliers, who often are trained to manage  hotels in operational excellence, according to brand identity and with focus on guest experience, and in case of expatriates have learned to do so everywhere in the world. They come to China with the idea that they must make this hotel excellent, ‘as they know it', even though their idea of an excellent hotel clashes with what owners want. Many a hotel manager came to China enthusiastically and left frustrated.

The opening of more hotels and new brands arriving is a dream for every international hotelier, in terms of hardware, facilities, scale and bringing new things to a virgin market. There are few places in the world where hotels are built bigger, faster, and with more marble and gold than in China.

And the hotel companies often have no other choice than to pick up these projects, before somebody else does. With this mindset, operational issues are easily overlooked. And then the hoteliers come in, and are faced with impossible tasks. China is an intensive country to work in, and often underestimated by new comers, but appreciated by those who learn the ropes and see the reality for what it is.

This is also the reality that TOP Hoteliers, as an executive search firm for many of these hotels works with. Regardless of brand, size of the project and ambitions of the owners one must understand the reality behind the reason why this hotel is here, and who are the ultimate decision makers. General Managers and other Department Heads may come and go. Even Hotel management companies may come and go.

But the hotel property will be there, for years to come, and it needs to be managed by somebody. And that is for the owners to decide.

As we are in contact with many hotel managers all over China we often hear about their frustrations with the owners. How they involve and mingle into affairs that in other countries an owner wouldn't bother with. This is partially to be explained by culture and historic development. The Chinese hotel owners came to be hotel owners because they were either all-powerful multi-layer government bodies where everything was decided in consensus and by political motives, or they were self-made man, or women who made smart and un-opinioned decisions and grew rich very fast, doing things nobody had done before and by following their gut feelings, not the advise of others.

Therefore, knowing a bit about the owning company of a hotel is as important as knowing the brand, the salary, the location if you are considering a next move. Like in every market there are upcoming and stagnant companies, advanced ones and conservative ones. There are owning companies with endless resources and some with limited resources. The amount of cash poured into the construction of the hotel is no measure as to how deep their pockets will be to run the hotel with long term vision and maintaining standards even when business is not as good as expected. China is the new frontier, with its opportunities and its pitfalls.

The main difference between China's hotel owners and owners in other parts of the world has been largely explained in the above. Another factor is also that for most of these hotel owners this is a first time into getting a peek into how a hotel is run.

By now they surely have been to other 5* international hotels, and have often traveled all over the world and seen the flagships of the various hotel companies before they ‘pick their brand', but that does not yet equal to understanding how hotel managers thick and define a good hotel. Compared to more developed markets, like South-East Asia, even the Middle East, this boom in hotel ownership has happened much later. The more established hotel owning companies in South East Asia, including China's Hong Kong often have already a history of 20 – 30 years, and have already gone through these motions.

These hotel owners have eventually learned to step back from day-to-day interference with the daily operations and purely look at (financial) results. Also, in these countries a second and third generation of hotel owners is gradually coming to the board (table), with different ideas about letting the hotel managers run the hotel and enjoy the benefits of a well-managed hotel that bring return on investment.

In China this second generation is yet to come out from the shadow of the first generation. As everything, time will bring gradual changes to China, but China seldom changes because the (foreign) management companies say so.

The foreigners, i.e. the expatriate managers, the hotel management companies as well as guests, investors, suppliers and consulting companies have to change to fit the particular market situation and demands in China.

About the Author:
René J.M. Schillings, a Dutch National, is the owner, founder and Managing Director of TOP Hoteliers, the first specialized hospitality recruitment agency to open offices in the People's Republic of China (in 2004). Based in Hong Kong he devotes most of his time managing the 2 offices in Shenzhen and Beijing, where his team of consultants recruit hotel managers for all major international and some local hotel companies in China. His company was very early to recognize the need for local talent, Mandarin speaking expatriates and China experienced expatriates. His knowledge of the China Hotel Industry stems from his career as Hotelier in China that began in 1997. He has a BA in Hotel Management from Stenden University, The Netherlands and an MA in International Tourism & Leisure Studies from Metropolitan University in London, England. He is a keen observer of industry trends and has published numerous articles on HR issues in hospitality in China.

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