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A hotel in Shenzhen
A hotel in Shenzhen
Li Juan

BEIJING — Over the past year more than 50 of China’s starred hotels have taken the initiative of voluntarily downgrading themselves. Chen Miaolin, vice-president of China Tourism Association, summed up the reaction of many: “I have simply never heard of such a thing, and I've worked in this field for decades!”

It is indeed curious, since the number of stars is normally associated with the hotel’s ranking by the way it’s furnished, the service level it provides, and thus its pricing. This is why Chinese hotels, like their counterparts around the world, had long struggled to obtain as many stars as possible, with the top level aiming for the five-star category.

But as data shows from the China Tourism Association, since President Xi Jinping took office two years ago and introduced the so-called “Central eight provisions” to improve official work efficiency by, among other actions, streamlining conference activities and promoting thrift, China’s existing 680 five-star hotels have suddenly lost 30% to 50% of their clients. In certain remote areas the average occupancy rate is lower than 50% while overall industry revenue fell by 25% in 2013.

Thus the luxurious hotels’ self-demotion appears to be an attempt for them to skate around their business difficulties in the face of the current public expense restrictions. These initiatives are the latest demonstration of the enormous turnover that China’s high-end hotels get out of public procurement and official receptions, and changes being made in the face of Xi's reforms.

Cut the ribbon-cutting

However, the case of the disappearing hotel stars may also be an early sign of the clever ways around the new belt-tightening. Though the various local governments all clearly specify the cost and the number of stars of the hotels designated for official conferences, it appears that the “self-demoted” luxury hotels have regained their business from officials while managing to maintain their standard prices or even raising them. Therefore the obvious logic is that these luxurious hotels are finding an end-run around the rules to cater to self-serving officials’ needs.

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Photo: kris krüg

This explains why trying to control official pomp by simply restricting the number of stars will not fundamentally solve the problem. By finding loopholes and vulnerabilities in the system, unscrupulous officials can cover all kinds of excessive expenses. So while they used to make a public display out of eating and drinking at the taxpayers’ expense, they are now just doing the same consumption, but in a quieter way.

It seems then that a better approach would be to simply cut the excessive number of meetings, conferences, and symposia that public officials attend. A popular refrain speaks about: “A mountain of documents and ocean of meetings. Leaders and cadres are busy cutting ribbons.” If these official meetings under various names didn’t exist then rampant rent-seeking and corruption would be less likely to occur.

Meanwhile it is time for China’s numerous luxurious hotels, which used to be parasites at official expense, to sound the alarm. They should start to reflect seriously upon how to restructure and run their businesses efficiently instead of taking taxpayers for a ride.

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