February 11, 2008 -- There were 14,000 star-grade hotels in China at the end of 2007, according to government statistics. The world's top ten international hotel management groups all have a presence in China.

"As one of the earliest industries open to the outside world, China's hospitality industry has enjoyed very fast growth," said Qiwei Shao, director of the National Tourism Bureau and chairman of the China Tourism Association at the 2008 Chinese and Foreign Hotel Management Forum. "With the rapid development of China's hotel industry, there will be more than 500 five-star hotels in China by 2015."

"China is increasingly connected to the world with trade growth and China's booming tourism. Foreign visitors and business meetings will increase significantly .That means promising opportunities for the luxury hotels," Shao added.

The early foreign investment in China's hotel was from Hong Kong companies and Singapore-based capital, but now investment from Europe, America and the Middle East is also increasing.
International management groups -- including Marriott, Starwood Housing, and Accor Hotels -- have opened their own hotels in China and others opt to enter the Chinese market through equity financing, acquisition or franchising, according to Nianguo Cao, director of the hotel department of DTZ, a global real estate consulting firm.

"Foreign capital is keen on investment in China's hotels despite the high investment requirements, high maintenance and intense market competition, because it generates substantial cash flow and as a property investment its value will be preserved and increased," Cao said.

"At first, five-star hotels are concentrated in the China's major cities," he said. "Especially driven by the Olympic Games and the World Expo, Beijing and Shanghai are the most popular cities for hotel investment. But as Beijing and Shanghai raise the threshold for market entry, China's second-tier cities -- such as Tianjin, Chengdu, Chongqing and Wuhan -- are on the blueprint for international hotel brands expansion."

Shangri-La is one of the international hotel management groups which has stepped up its expansion pace in China's secondary and tertiary cities.

"A lot of hotel operators are focusing their strategy on the second-tier cities where the residents' disposable income and consumption increase rapidly," Judy Wang, director of public relations for Shangri-La in China told Emerging China. "Among China's 21 Shangri-La Hotels, 12 are located in Chengdu, Xi'an, Wenzhou, and other developed second-tier cities. Shangri-La is expected to open another 31 hotels by 2010 around the world, 14 of which will be in China."

And it's not just the high-end players who are looking at China's second- and third-tier cities. Some international economy hotel operators, such as Super 8, are also entering the market.

"Foreign investors are optimistic about the development of China's hospitality brought by the steady growth of tourism and the business conference industry," Yusong Jin, vice president of Beijing Real Estate Agents chain told Emerging China.