Beijing hotels shun five-star label as anti-graft campaign hits revenue

A market downturn and crackdown on corruption are forcing Beijing's luxury hotels to cut prices and shun the "five star" tag, once the ultimate status symbol in the hospitality industry.

The capital removed all five-star hotels from its government procurement list earlier this year, forcing some operators to turn to the mass market. Setting a new trend, Beijing Jin Jiang Fu Yuan Hotel gave up its five-star qualification altogether during an annual reassessment by the China Tourist Hotel Association.

Official data shows revenue at the capital's five-star hotels declined by 8.9 per cent in the first eight months from a year earlier to 7.2 billion yuan (HK$9.1 billion), also in part due to a 6.1 per cent drop in foreign visitors over the period.

"The government's crackdown against extravagant consumption is having a significant impact on prices, although the occupancy ratio is picking up as Beijing remains the country's best-performing hotel market," said Mandy Li, a senior vice-president of the hotels and hospitality group at JLL.

Beijing's average five-star hotel room rate fell 7 per cent in the first seven months from a year earlier to 805 yuan while the occupancy ratio improved slightly to 61.5 per cent, according to the latest official data.

"Some newly opened hotels are not eager to be labelled five-star," Li said.

Others are taking innovative approaches to cater for the mass market.