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An End to Difficult Owners in China?
By René J.M. Schillings
Tuesday, 22nd June 2010
 
A most often reported issue and frustration by hotel managers in China is their relation with the hotel owner and to streamline their needs, desires and targets with the other needs of the hotel management company, the staff and the guests.

The inability to work with the owners has cost many an experienced hotel manager to loose his job, or other staff to walk away, and the reputation of the owner can even be a warning sign for prospective candidates not to consider a job opportunity with a hotel.

Whereas we recognize that much of this difficulty to relate to hotel owners in China is caused by the relative inexperience of these owners of owning and operating hotels, part of the blame must also be allocated to the hotel management companies who are too eager to sign up for more hotel projects and, driven by the need of expansion, often sacrifice due diligence, brand standards, even their own employees for the sake of getting a management contract and/or holding on to it. As China develops as a modern nation, so does the experience and behavior of the hotel owners.

A part of this development towards a more efficient economy has led the Central Government to step in to avoid rampant development, wastage of resources and monster projects that are not economically viable.

In January 2010, the State-owned Assets Supervision and Administration Commission of China issued a notice that, starting from 2010; hotels that are not part of the primary businesses from central state-owned enterprises must be divested to other organizations.

This means that the many State-Owned-Enterprises (SOE's) for who 1 or more hotels is just a part of their diversified package of investments, but not part of a structured venture into tourism or more specific hotel management as a core business will be forced to hand over their assets to other SOE's who already have formed a defined hotel management company to create more efficiency when state funds are allocated to SOE's who need funds to operate their business.

This will see a concentration of hotel assets in the hands of fewer SOE's, the four key criteria being; majoring in tourism; having their own hotel brand, having a professional hotel management team; and having a development strategy for their hotel segment.

Although these SOE's may still be far away from matching the worldwide hotel chains in how they operate, manage and make profit from hotels, this is a positive development that will see a more focused policy by the ‘new' owners. SOE's that own more hotels and have serious interest in the tourism industry as a whole will benefit from synergy and be able to compare notes on various hotels' performance.

As existing management contracts on these hotels will not expire when ownership passes from one SOE to the other, these more specialized hotel owning SOE owning various hotels managed by different hotel management companies will also review how different management companies manage their assets, and compare notes.

And whilst one can not compare apples to pears, the hotel management companies will face some serious challenges to their way of management. This new policy by the Central Government however is restricted to purely SOE's and does not include the many private companies.

Although lines between SOE's and private owned companies are sometimes blurred, managing and owning hotels is already for long time no longer the privilege of the state. Since the reforms in 1984 private hotel ownership is possible in China, and especially since 2000 – 2005 many successful private entrepreneurs in China have ventured into owning and managing hotels as part of their investments.

For the majority of these private owners, owning a hotel is something new, and the ways to operate a hotel and to make profit (if that is the objective) may hugely differ from their previous experiences in business.

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, a.k.a Hotel Management School Leeuwarden, 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.

Company website: www.tophoteliers.com
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