From Property, page 42, issue no. 372 June 16, 2008
Translated by Ren Yujie
Original article: [Chinese]

Though the 2008 Olympic Games are just around the corner, lodging prices at Beijing's star-rated hotels remained uncertain – with high-end hotels waiting for cues from competitors and lower-end ones worrying about low occupancy.

It appeared that by now, the majority of the rooms at high-end hotels had been booked up by the Chinese Olympic Committee (COC), while the remaining rooms were still awaiting price adjustments.

Based on data from the COC website, the Committee had thus far signed contracts with 113 hotels rated three-star and above, acquiring up to 70% of their rooms. Among them were almost all of the five-star hotels in the city, 35 to be exact, and making it tough for individual visitors to get rooms there.

The Beijing Tourism Board released a statement in late May, saying that the contracted hotels would provide 70% of their rooms to COC at previously agreed-upon prices, while the remaining 30% could be let out according to market rates like at any other hotels.

The agreed rates between the COC and contracted five-star hotels were priced between 2,140 and 2,960 yuan per night for each standard room; while non-contracted rates at these hotels, according to the tourism board, ranged between 3,840 and 7,910 yuan.

The above data seemed to provide a benchmark for room rates during the Games. However, the reality was a lot fuzzier.

Fully Booked?
A check by the EO revealed that majority of the five-star hotels turned down individual reservations. The Beijing Hotel, the Peninsula Palace Beijing and the Crowne Plaza Park View Wuzhou Beijing said all rooms were booked and declined to reveal their rates.

When asked, the Beijing Jade Palace Hotel quoted 5,600 yuan per night for each standard room during the Olympic period, whereas its current pricing stood at 700 yuan for the same room.

If room rates for the Olympic period had yet to be fixed, how did the hotels seal reservation deals?

"At the moment, we still have some rooms left, but we have yet to decide the prices. You could still make reservation around late July or early August," such was the reply of four-star Jianguo Hotel when the EO inquired about room availability and rates.

Other COC-contracted hotels like the Reagent Beijing and Park Plaza Waifujing replied that all rooms were taken up by the Committee, whereas in the truth the COC had only acquired 70% of their rooms. Could this be an excuse to avoid revealing the market rate for the remaining rooms?

A source in the industry told the EO that most hotels already had the published rates ready, but the front desk personnel were usually ignorant of reservation details for the Olympic period due to special reservation and payment procedures involved.

The source revealed that for reservation of staying for less than a week, the guest must make advance payment in full to secure the booking. In addition, many hotels only entertained reservations for the entire Olympic period, thus special sales teams were entrusted with the task, adding difficulties for independent travelers to access reservation information.   

"Not that many orders and enquiries. This is happening not just to us, but to many hotels too," said a manager for a website handling hotel reservations for the Olympic period.

DTZ Hotel Consultancy senior manager Wang Jing also revealed that the ratio of confirmed reservation at many high-end hotels only made up about one-third of the rooms available.

Therefore, it seemed that both hotel operators and guests were adopting the wait-and-see strategy.

Pricing Dilemma
Wang rationalized that those COC contracted hotels were already in a secure position, and in no hurry to let out the remaining 30% rooms, which could be reserved for guests with "connections".

He said most hotels were waiting to see what their competitors' rates were, because if a hotel was to fix its rate too soon without reference, it could suffer losses for pricing the rooms too low or backlash for over-pricing.

"From what we have learned so far, major hotels already have a basis for pricing. Rooms at five-star hotels would be four to five times higher than usual, and the very high-end ones could be five to seven times more. As for the four-star hotels, the rates would be three to four times higher," said Wang.

However, based on the EO's investigation, the published rate for Olympic rooms as quoted by the Beijing Jade Palace Hotel was already eight times higher than usual. Normally, this hotel's rates were much lower than the other five-star counterparts.

According to publicly available data, during the last Olympic Games in Athens, room rates there increased between three and six times, and the prices of five-star hotels amounted to about 6,000 to 8,000 yuan per room per night.

Wang, however, pointed out that there existed a gap between the hotelier industry in Athens and Beijing, adding that traditionally, hotel rates in the former were 20% and 30% higher than those in Beijing.

As 70% of the rooms in many five-star hotels were acquired by the COC at "controlled prices", there were expectations for the remaining rooms to be let out at inflated rates, according to sources. 

Beijing Lutong Consultancy and Service is an internet company providing hotel reservation services for "Olympic Rooms". The bulk of its affiliated hotels are from the medium and lower-end range.

It had started offering reservation since June 2007, however, business only picked up around May this year.

"Many hotels called up and told us that they had fixed the prices too high and wished to lower the rates. This came after they realized too many rooms remained vacant," said the website manager.

At present, these economy class hotels fixed the rate at around 1,400 yuan per room, which usually cost only 200 yuan. The above person in-charged revealed that chances were, by late June, pricing for these hotels would drop significantly.

He said the website also handled reservations for several COC contracted hotels. He added more reasonable room rates appeared to have emerged among the medium and lower-end hotels based on demand and supply, but the high-end market seemed to be unmoved.