Hotels in China: A Comparison of Indigenous and Subsidiaries Strategies

Abstract

Due to the rapid economic growth in China, tourism and particularly the hotel business has expanded tremendously. The purpose of this research was to compare the strategy and performance of foreign and Chinese owned hotels in China. The findings show that foreign hotels have used selective entry, growth, and management strategies to compete effectively. For instance, incremental growth has been achieved through targeted mergers and acquisitions. Also, foreign run hotels are more profitable than domestic ones. The Chinese enterprises have been playing 'catch-up', but have begun to adopt standard international hospitality practices combined with selective cultural adjustments to achieve growth. One area where they have an advantage is their willingness and ability to locate all over China.

Learning From “Alien Monks?” The Productivity Spillovers of Foreign-Invested Hotels in China

“…While the top 10 international hotel chains have entered China's market, Jinjiang International Hotel Management Corp, China's largest domestic hotel chain, was ranked No. 13 worldwide in 2009 (Okoroafo, 2009). Economies of scale make foreign firms better positioned in terms of access to capital, human talent, and supply chains (Heung et al, 2008).…”

“…Last, foreign-invested hotels enjoy more favorable policies and treatment than their domestic counterparts in terms of taxation and tariffs, foreign exchange rates, pricing, and human resource policies (Pine & Qi, 2004). Previous empirical studies have indicated that foreign-hotel firms tend to outperform China’s domestic counterparts in terms of occupancy, profits, revenue per available room (RevPAR), and efficiency (Gu et al, 2013; Okoroafo, 2009; Pine & Phillips, 2005; Yu & Gu, 2005).…”

Successful Growth Strategies of Three Chinese Domestic Hotel Companies

“…But the growth was also driven by Chinas own increasingly affluent population who are traveling more and more within their own country ( Pine & Qi 2004). Both Chinese owned hotels and foreign owned hotels have great potential for future growth however the threat of oversupply remains a critical issue (Okoroafo 2010). Many companies have been induced to expand however many difficulties create conditions which either enhance or restrict the practicality and profitability of expansion.…”

“…Chinese companies have been playing catch up but have begun to adopt standard international hospitality practices combined with selective cultural adjustments to achieve necessary levels of growth (Okoroafo 2010). In the past many of the hotels were state owned and run and they did not feel the urgency to compete and improve their performance (Okoroafo 2010).…”

“…In the past many of the hotels were state owned and run and they did not feel the urgency to compete and improve their performance (Okoroafo 2010). Hotels in China operate under different ownership structures which include state-owned hotels, collective, private alliances, share holding cooperatives, foreign invested and Hong Kong, Macau and Taiwan invested to name a few (CNTA 2003) A study by Pine and Qi in 2004 examined the formation and expansion of hotel chains in China.…”