Market forces are leading to more Luxury hotels being build in China. It is probably that the recent uptick is a result of the complementary forces of increased native Chinese incomes which lead to increases in domestic tourism, and increasing expectations from western tourists that they be able to enjoy the same luxury accommodation that they are accustomed to elsewhere.
The increase has not been limited solely to major cities like Beijing and Shanghai. Smaller cities with economic relevance due to having corporation headquarters and industrial production capacity, and historic sites are also getting in on the action. There are “getaways to more remote destinations in each province” where the levels of comfort are rising to meet tourist expectations.
Hervè Humler, the President of Ritz Carlton has said that “We’ve got a lot of development, but it’s outside the US. Asia is booming. People talk about China slowing down, but I don’t see it. There aren’t enough rooms.” He has also expressed his belief that there a good opportunities for the company within China.
China’s government has embraced tourism to a higher extent in the most recent 5 year plan as well, so it is likely that the current boom in Luxury hotels and travel accommodations will continue for some time.
sources:
http://intransit.blogs.nytimes.com/2013/11/30/more-luxury-hotels-open-in-china/?ref=china
I found your point about how smaller cities with economic relevance are undergoing some development as well interesting. Hotels are trying to take advantage of all of the facets of Chinese culture, including the history of some of these smaller villages and cities. The one-child policy will probably mean less hotel occupancy over the next generation, as population growth could plateau.
Although population is expected to stagnate, china is still growing at a high rate which will lead to significant income growth. There might not be more people, but they will be richer and as incomes rise, leisure is one of the goods that you would expect to see greater demand for in the future. Realistically, pesant farmers cant really travel on extensive vacations, but urban professionals are more capable of doing so and they will, so i guess urbanization should boost domestic tourism on two fronts.
The Chinese have an obsession with luxury and first-class amenities, but I doubt the distinction. When traveling from Qingdao to Beijing by high speed rail, my father only had to pay 8 dollars more for a first-class ticket. When visiting Shanghai for the 2010 World Expo. We stayed in a “five-star” hotel which was not considerably more than a business hotel. And for a bit less than $70 a night.
Do you know to what extent was that lower price a difference in PPP? I believe Smitka said that he ate at really nice restaurants for very cheaply as well. Some of the difference in price is undoubtedly that we are getting waxed in America by high premiums on luxury that the Chinese wouldn’t be as willing to pay for, so prices are more in line with costs. To the extent that most hotel costs would be embodied in building costs and labor, all the trappings of wealth that are really just window dressings shouldn’t make the cost of running the Ritz insantely different from the Hyatt, but we are willing to pay more so they charge more.
We saw an example of a small local room and board in Hessler’s book. Would the luxury hotels cater to Chinese businessman or international tourists? It would be interesting to see if the new “five-star” hotels are joint-ventures or Chinese in origin.
I am sure that at least the Ritz Carlton would have to have standards to meet the company’s brand image in China. It makes sense that hotels would be an good industry for luxury in China, as they can be used as an outward/public display of wealth and status for companies or individuals to buy rooms for guests they are trying to impress.