Hotel Markets and Development in China

Over the past ten years, the five-star hotel market in China has grown at a pace of 11.8% a year. While growth was predominantly driven from the Tier One cities such as Beijing, Shanghai, Guangzhou, and Shenzhen, there is now a push to develop key resort destinations as well as Tier Two cities. Key to this growth has been a focus on the high-net-worth Chinese consumers. According to the Global Wealth Report in 2019 by Credit Suisse, there were 100 million Chinese among the world’s top 10% of richest people, compared with 99 million in the United States. Together with a continually emerging middle class, this has prompted greater liquidity in the market, resulting in travel for both business and leisure, increasing at the highest growth rate in the world. Developers have attempted to replicate the hotel market existing in other more developed economies throughout the world. In addition to this trend, the Chinese market itself has undergone a significant transformation. With the focus on eliminating corrupt government officials, the development market has been challenged with a reduction toward luxury hotel use for government functions. An unstable regulatory environment creates difficulty in receiving timely approvals of development submissions. This chapter explores the importance of cultural differences in this market and how companies intending to enter the high-end hotel business must be prepared not only to develop and operate differently but also to have patience in adapting to local policies and practices.