Growth of China's hotel chains and their future expansion

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Growth of China's hotel chains and their future expansion

 

Author: Qi, Pingshu
Title: Growth of China's hotel chains and their future expansion
Degree: M.Phil.
Year: 2002
Subject: Hong Kong Polytechnic University -- Dissertations
Hotel chains -- China
Hospitality industry -- China
Department: School of Hotel and Tourism Management
Pages: xi, 208 leaves : ill. ; 30 cm
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b1657677
URI: http://theses.lib.polyu.edu.hk/handle/200/3902
Abstract: Since the rise of professionally managed, multi-unit organization hotel chains in this century (Ingram, 1996), the world hotel industry is dominated by hotel chains with more and more hotels affiliated in some way with a chain operation (Pine, 1998). As a result of China's economy reform and opening up, China's hotel industry experienced dramatic changes, especially with the involvement of multinational hotel companies (MNHCs) and their introduction of the concept of chain operation. The influx of massive inbound tourist numbers and technology transfer enabled the development of indigenous hotel management companies and the formation of local hotel chains. However, after decades of development, local hotel chains are still very slow in expansion and much less competitive than multinational hotel management companies. How indigenous hotel chains will develop has become a major concern in the hotel industry. This research aims to examine the development of hotel chains in China since 1978 and to make policy and operation recommendations for further expansion of hotel chains. It first explores and describes the historical and current situation of hotel chain development in China, and then a model of hotel chain formation is built to further examine the development of chain operation in the general hotel industry. The proposed model is based on the two parties in the process of hotel chain formation - hotel management companies and independent hotels. The model identifies and examines the major factors for both parties and how these factors interact during the course of chain formation. Domains of this model are identified as: external pressure, internal pressure, environmental scan, organizational capability, assessment of availability, form of alliance, and management/operation. Through the application of this model in China, certain opportunities are identified to discuss the necessity for and the viability of indigenous hotel chain development. Major issues and barriers in the process of hotel chain formation and expansion are also identified. Possible measures and strategic issues were further explored, which would assist in the future development of hotel chains specifically, and the hotel industry at large in China. This research uses qualitative and case study methods to investigate the existing situation of the hotel industry and hotel chain operation, and to examine the model of hotel chain formation in China. In-depth interviews with 26 hotel managers and industry experts were conducted by using closed and open-ended questions relating to hotel chains and independent hotels in the process of chain formation and expansion. It is revealed that the increasing external and internal pressures are driving the hotel industry towards a certain degree of consolidation and restructuring. The changes in the hotel industry in recent years (e.g. overprovision of hotels, structural changes in the industry, rise of domestic tourism, great demand for economy and budget hotels, and creation of new resort and motel sectors) provide potential and productive opportunities for chain expansion. However, the growth of indigenous hotel chains was constrained by both the complicated business environment in the country and the inadequate management capability of the hotel management companies. As China is in a transition period from the previous planned economy to a market economy, it still lacks the essential market principles and relevant rules, legislation and mechanisms of a market economy. Further reform of the economic system in China and the establishment of a competitive mechanism are recommended to create a better business environment for chain operation. These should cover reform of state-owned hotels, ease restrictions on the free flow of hotel assets, allow rationalization of legislation and regulations, decrease government intervention and provide more incentive policies for hotel chain growth. The development of organizational capability of hotel management companies is an urgent need for the expansion of hotel chains. More business acumen and adaptability should be exploited to get essential financial, human and other resources, and integrate these resources into productivity and services for Chinese hotel chains. The development of organizational capability of hotel management companies will focus on the standardization of management models, creation of distribution channels and networks, and branding of hotel products and establishing supporting systems. The management competence of the indigenous hotel companies should be upgraded to an international standard, whilst keeping adaptability and flexibility in the special Chinese circumstances.

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