High Times For Good, Bad And Agly

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　　There are attractive traditional screens in the restaurant and artwork that gives far more of a local feel than does the rather bland exterior. The lobby of the three-star hotel is also unmistakably Chinese, even if the rooms themselves are more generic.

　　Restaurant prices are closer to what might be expected in a developed country, a coffee costs 40 yuan (Dh23.36), but at least visitors are left in no doubt which country they are in.

　　There are hundreds of other state-owned hotels such as this dotted across China, but the environment in which they compete is changing rapidly as foreign operators grow their market presence.

　　Marriott aims to double its chain of 60 by 2015. InterContinental, with more than twice as many properties, is also aiming to double its presence in the next few years. Often the hotels themselves are owned locally, with the chains being paid management fees to run them.

　　"The growth numbers we have seen are truly impressive and indicative of an emerging market in a significant growth phase," says Damien Little, the director in China of Horwath HTL, a hospitality consultancy, .

　　The fast-paced growth comes as business and leisure travel in China expands at a breathless rate, with domestic tourists making 2.1 billion trips in 2010, up 11 per cent on the year before.

　　By 2014, China is expected to be the world's largest market for domestic tourism in terms of number of trips.

　　Revenue is growing even faster. According to data from Horwath HTL, last year hotel industry turnover grew more than 30 per cent in cities such as Chengdu and Xi'an, while Guangzhou and Tianjin were not far behind.

　　In the capital Beijing, revenues increased 22 per cent last year and only Shanghai among the major cities suffered a fall, although this was inevitable because the 2010 figures were inflated by the World Expo.

　　Yet there are grounds for caution. With supply sometimes expanding faster than demand, a few major cities have recorded falls in revenue per room even though total turnover is increasing.

　　There are other challenges. According to a 2010 Journal of Management Research paper titled Hotels in China: A Comparison of Indigenous and Subsidiaries Strategies, foreign-run chains have higher occupancy rates, and generate more revenue per room, than state-owned establishments.

　　"The major problem with state-run hotels is that they're losing money," says Andrew Chan, an assistant professor in the school of hotel and tourism management at the Hong Kong Polytechnic University. "They don't offer good services, but because they're owned by the state and subsidised by the state, at the end of the day they will continue to be there.

　　"Their main purpose is not to make a profit but to look after the employees and look after the party members."

　　While standards of service, marketing efforts and branding are often below those at global chains, Chinese hotels are gradually becoming more competitive with loyalty programmes.

　　In some cases as many as half of all guests at a hotel book through its loyalty programme, a major driver of increased occupancy rates.

　　While the foreign luxury chains are primarily American or European, three months ago it was announced that India would soon have a presence in the world's second-largest economy. The Taj Group, owned by Tata, plans to open two high-end hotels in south-west China's Yunnan province.

　　At the budget end of the market, Chinese hotels dominate, with no-frills chains at prices that start at as little as 100 yuan a night.

　　Groups such as Home Inn have more than 600 properties, and they are growing by buying up rivals. Last year, the chain announced it was acquiring the 300 outlets that were part of the Motel 168, Motel 268 and Yotel QQ brands for $470 million.

　　While this type of consolidation is taking place, concerns about overcapacity are growing.

　　"So many players are now present in the market and these players are also looking to open more new outlets in the future and this may lead to oversupply or saturation in China's budget hotel market in the next few years," says Parita Chitakasem, a research manager for Euromonitor International.

　　Ultimately, however, the overcapacity issue, with budget and high-end hotels, is likely to be dealt with by continued growth in demand.

　　"In terms of internal consumption and domestic demand, the numbers are doubling in a few years. Increasingly over the past decade [growth in demand] is due to domestic demand," says Mr Chan.

　　"In terms of good hotels, I think we still need more."