In the three years of the epidemic, the real estate industry has been heavily pushed, and the real estate companies that have fallen into a liquidity crisis have their own lawsuits, and it is difficult to take into account the five-star hotels built in the expansion era.
Anyone who has played the game Real Estate Tycoon knows that no matter how good and valuable an asset is, when the time comes to cash flow, it is time to sell it or sell it – this is the only way for players to stay at the table.
Text | Ma Yanjun
Edit | Shinno
Operations | Puffs
Luxury hotels, put on the shelves
Standing on the banks of Suzhou Creek and with sweeping views of the Bund and Lujiazui, the Bulgari Hotel Shanghai is never short of topics. Whether it is "40 celebrities sharing a Bund viewing room" or "the Chinese New Year's Eve room fee is up to more than 300,000", it has crossed the Internet celebrity filter, highlighting the scarcity and nobility beyond magic.
Until a sale announcement pierces through the fog and reveals its true value. In December 2023, OCT (Asia) announced that it had sold part of the assets of the Shanghai Suhewan project at a transaction price of 2.43 billion yuan. The most striking target of the project is the Bulgari Hotel Shanghai.
Opened in 2018, the ultra-luxury five-star hotel, which took six years to build, is the sixth Bulgari hotel in the world and the second in China, and is proudly described by officials as "the sixth jewel of the laurels". Judging from the minimum price of six or seven thousand yuan per night, its positioning is already the top luxury level, and it was once called "the most expensive hotel in Shanghai" and "luxury trump card".
▲ Bulgari Hotel Shanghai. Photo / agoda
At the beginning of the opening of the Bulgari Hotel Shanghai, Lin Can went to check in and experience, and he still remembers it vividly, "The screen in the lobby is the pattern of the floor tiles of the Pantheon in ancient Rome, all the furniture is from the top Italian home furnishing brand, and the restaurant is managed by Michelin-starred chef Niko Romito, and the taste is impeccable."
In just five years, the beautiful Bulgari Hotel has been sold in a low-key manner. In the past two years, there have been many five-star hotels, lined up by the owners to put on the shelves, and changed to new owners.
Before October 2023, the Westin Beijing will be crowned with the word "Jinmao" in front of it, and at that time it was still a shining asset of China Jinmao. But after that, "Jin Mao" was quietly erased, and the full name of this five-star hotel under the Lufthansa Bridge became The Westin Beijing Bohai Runze. The buyer, Beijing Bohai Runze Commercial Management, pocketed it at a price of about 2.8 billion yuan.
▲ The Westin Beijing. Photo / Ctrip
On January 19, 2024, Country Garden, which is in the storm, was also listed on the Guangzhou Equity Exchange to transfer a series of assets, including Phoenix Hotel, Renhe Apartment Building, Zanglong Mansion Office Building, etc., among which Phoenix Hotel, as the first natural landscape hotel built with the "platinum five-star" standard in China, has the highest proposed transfer price, reaching 1.26 billion yuan.
According to the statistics of the third-party organization Milestone Research Institute, in 2023, there will be 124 hotels with auction prices of more than 100 million yuan, among which Sheraton Shanghai Hongkou Sanzhi Hotel, Fairmont Nanjing Jinao Hotel, Westin Chongqing Jiefangbei Hotel, Ningbo Yuanzhou Hotel, Shanghai Wanda Reign Hotel and other luxury hotels will be listed for sale in 2023.
Some five-star hotels that have not been sold are also facing varying degrees of crisis.
For example, the Ritz-Carlton, Tianjin, a subsidiary of Tianjin Tianfang Group, is a landmark building in Tianjin and the first luxury hotel in Tianjin, located in the former British Concession, the predecessor of the hotel was Gordon Hall, which was founded in 1890, that is, the British Concession Ministry of Industry Bureau Building, which has been open for more than 20 years.
But in August 2023, it was auctioned off as collateral along with the Sanya Intercontinental Hotel and the PS-Valley Hot Spring Hotel. After three rounds of price cuts, a mysterious buyer "H5219" bought it at a price of 2 billion yuan. The Shenzhen Kaisa Golden Bay Hotel, which will also be auctioned in 2023, has an appraisal price of 2.3 billion yuan, but the starting price is only 1.67 billion yuan, and it was withdrawn before the auction.
The latest news of the betrayal is the most high-profile landmark in Haitang Bay in Sanya - Atlantis. Covering a total area of 540,000 square meters, the tourism complex integrating eight major business formats such as resort hotel, entertainment and catering, built by Fosun Tourism with an investment of more than 10 billion yuan, has been a business card of Sanya Tourism since its opening in 2018. Price is one of its most prominent labels, and the most expensive royal suite during this year's Spring Festival costs as much as 288,000 yuan a night.
▲Atlantis Hotel was once the filming location of the hit drama "Dear, Loved", and the Poseidon underwater suite where the protagonist lives is priced at 108888 yuan a night. Picture / Film and television screenshot
Not long ago, on March 5, Reuters quoted sources as saying that Fosun International planned to sell all or part of the equity of Atlantis Sanya in order to reduce debt. Fosun's reply was: "Our attitude is open, but the premise is that we are consistent in strategic identity and value identity. ”
Zhao Jiexiong, who is engaged in the hotel consulting industry, recalled that the tide of five-star hotel sales began to show signs in 2021, and reached a small climax at the end of 2023.
As for why most of the hotels that are sold are luxury hotels, the reasons are simple and straightforward.
"The landlord's family has no surplus food", Zhao Jiexiong explained, the owners of domestic five-star hotels are mostly Wanda, Country Garden, Greenland, OCT and other real estate enterprises, in the past in the real estate development projects have accumulated a lot of star-rated hotel assets, when the debt is problematic, the need to obtain liquidity, the investment is large, the business prospects are not clear heavy asset hotels, often become the first to be thrown off the "burden".
Brilliant and foreshadowing
The rise of five-star hotels in China has a clear vein that is at the same frequency as economic development.
As early as 2003, Lin Can, who was still in junior high school, often followed his father, who was the chairman of a chemical company, in and out of five-star hotels. In those days, it was a status symbol, traveling in a palatial place to discuss business and entertain customers, "in order to look good." In Lin Can's memory, five-star hotels are characterized by "new" and "big", she has seen the world's tallest lobby in Shanghai Jinmao Hyatt at that time, and also seen a whole wall of fish tanks in Guangzhou hotels, "I was stunned to see it."
▲ Hyatt Regency Shanghai Pudong Jinmao. Photo / Visual China
When Lin Can first came into contact with five-star hotels, it was also the initial stage of five-star hotels in China. In 1983, Guangzhou White Swan Hotel opened, which was also the first five-star hotel in China, and for more than ten years, the five-star hotels were mostly used to receive foreign guests, dignitaries and overseas Chinese. With the successive entry of foreign capital into China, around 2000, a number of international five-star hotels appeared in Shanghai, including Portman Ritz-Carlton, Pudong Shangri-La, Puxi Four Seasons and so on.
The flow of money determines the pace and rhythm of the expansion of five-star hotels.
Around 2006, Beijing's Xicheng Financial Street opened three luxury hotels in one go: InterContinental, Westin and Ritz-Carlton. At that time, the China Securities Regulatory Commission, the China Banking Regulatory Commission, the China Insurance Regulatory Commission and major banks were successively moving into the financial street, and the old town, which was once full of dilapidated houses and miscellaneous courtyards, was transformed into a place where every inch of land was valuable, and the chairman and senior management of the company waiting for the company to go public dragged suitcases and kicked leather shoes, and became the main customers of the three hotels with their heads held high.
Then, the 2008 Beijing Olympic Games gathered the keen attention of internationally renowned hotels to emerging markets. 33 brands from 22 international hotel management groups, including Hilton, Park Hyatt, The Opposite House and Aman Yihe, have appeared in Beijing one after another.
Foreigners flocking to China from all over the world have also raised the prices of five-star hotels to an all-time high. According to the statistics of Securities Daily, the average price of a standard room in a five-star hotel in Beijing in 2008 was 3,623 yuan per day, 2.6 times higher than that of the same period in 2007. Based on the assumption of an average occupancy rate of 75%, Beijing's star-rated hotels benefit from the Olympic concept, with an average revenue growth rate of more than 600%, while hotels in areas adjacent to Olympic venues have the potential to grow by more than 10 times.
It was also a time when infrastructure was booming and China's real estate industry was booming, with real estate developers grabbing huge sums of money to acquire land, but local governments gave new conditions in order to boost the overall development of the regional economy. Zhao Jiexiong mentioned: "At that time, many local governments would require the construction of high-star hotels when they sold land, which could not only develop cultural tourism, but also attract investment and enhance the image of the city. ”
For example, in the 2012 land transfer in Sanming City, Fujian Province, it was clearly required that "when the land bidder participates in the bidding, it must provide a five-star hotel authorization certificate, or a five-star hotel hosting agreement (letter of intent) of an international brand hotel management company, to ensure that the star rating meets the standard within three years after the hotel opens".
If you fail to get the five-star rating on time, you need to "pay 6.8 million yuan in land transfer fees within 30 days after the expiration of the three-year appraisal week, and a late fee of 0.5‰ per day will be charged after the deadline", which is costly.
The construction of a splendid and majestic five-star hotel can raise the city skyline and is also a powerful footnote to the economic improvement. In order to create this city card, the local government will also give corresponding subsidies. In 2009, Baoshan District, Shenzhen, clearly stipulated that "a five-star or platinum five-star hotel that has been completed and opened in our district and has been assessed by the National Tourism Administration will be rewarded with 20 million yuan and 50 million yuan respectively".
Zhao Huanyan, chief knowledge officer and senior economist at Huamei Hotel Consulting, once counted that from 1999 to 2016, the number of five-star hotels in the country increased by 10 times. During that time, not only did the number of five-star hotels in first- and second-tier cities explode, but also in the broader lower-tier cities, five-star hotels also appeared. Qiannan Prefecture in Guizhou Province will promote the construction of 17 five-star hotel projects in 11 counties and cities, which was written into the public report of the draft government plan in 2013.
Although the construction of five-star hotels can help to quickly acquire land and obtain subsidies, the construction of hotels is not a "good deal" in the eyes of real estate developers.
"The construction cost of high-end hotels, especially five-star hotels, is very high, with an investment of more than 10,000 yuan per square meter, and hotels are not as convenient as office buildings to sell, which is an inefficient asset with a low yield, so many real estate companies will drag the hotel to the end and then build. Zhao Jiexiong explained.
The five-star hotel has been built with great effort, and the operation is also a difficulty for the developer. The relevant evaluation standards for star-rated hotels in mainland China have clear provisions on the decoration, facilities, and services of the hotel, and many real estate companies will entrust the operation and management to internationally renowned hotel brands, such as Wanda Real Estate's hotels in various places, which are respectively cooperating with Intercontinental, Sheraton, and Hyatt, and the operation and management costs are not a small amount.
"To operate a five-star hotel, the owner has to pay a basic management fee of one million yuan to the hotel management every year, and the incentive management fee, both of which are rising year by year, and the incentive management fee has risen even more sharply, from six or seven million to ten million in the past ten years. Zhao Jiexiong said.
But in the era of high confidence, these "small money" did not stop the enthusiasm of real estate developers with deep pockets. At one time, with the full support of the financiers behind the scenes, the major hotel brands took turns in Beijing, each leading the way.
In 2010, Park Hyatt's two-year record as the "tallest restaurant in Beijing" was broken by China World Trade Hotel, in 2012, the Four Seasons Hotel opened next to Kempinski, in 2014, Waldorf Astoria Beijing, located in Goldfish Alley and featuring courtyard suites, was officially opened, known as the "ceiling of luxury hotels", and in the same year, Rosewood Hotel, which was built next to CCTV, a new landmark in Beijing at that time, became one of the most popular hotels on social media in the mobile Internet era with its "more outstanding" afternoon tea.
▲ Rosewood Hotel's check-in photos are going viral on social media. Photo / Screenshot of Xiaohongshu
By 2019, the number of five-star hotels operating in China had reached its peak, with a total of 822 hotels. However, the turmoil of real estate companies, the high management costs of hotel brands, and the sudden outbreak of the epidemic also laid the groundwork for the subsequent wave of five-star hotel sales.
Real estate developers cut meat, and the "coal boss" copied the bottom
According to the official website of the Ministry of Culture and Tourism, as of March 2024, there are 802 five-star hotels in the country, and the "National Star-rated Hotel Statistical Survey Report" shows that from 2020 to 2022, the number of five-star hotels listed in the country has a negative growth.
▲ From 2019 to 2022, the number of star-rated hotels in the country declined. Photo / Milestone Research Institute
In this, there are almost no local brands. In the 2022 "Top 50 Global Hotel Brand Value" list released by the British brand evaluation agency "Brand Finance", there are only four Chinese brands in the top 50, of which only Shangri-La, headquartered in Hong Kong, China, ranks 7th, and Jin Jiang, Hanting and Quanji rank 28th, 33rd and 40th respectively, but these hotel groups mainly focus on economy hotels, and the luxury hotel market is still firmly occupied by foreign groups with a longer history.
According to hotel industry sources, the industry generally believes that Bulgari, Ritz-Carlton, Four Seasons, Peninsula and other hotels are luxury five-star hotels, Park Hyatt, Intercontinental, W Hotel and other hotels are boutique five-star hotels, and Hyatt, Sheraton, Hilton and other luxury five-star hotels are business models. As for the other hotels, they are "affordable among the five-star hotels".
In Zhao Jiexiong's view, the hotel business of domestic real estate developers still follows the real estate thinking, pays more attention to the value of assets, and lacks experience in management, operation and service. Wanda opened 85 hotels in 2019, but that year's financial report showed that the hotels had a net loss of HK$150 million for the year. R&F Properties took over 77 hotels in Wanda for 19.9 billion yuan in 2017, and then lost money for five consecutive years.
In the three years of the epidemic, the real estate industry has been heavily pushed, and the real estate companies that have fallen into a liquidity crisis have their own lawsuits, and it is difficult to take into account the five-star hotels built in the expansion era. The Overseas Chinese Town, where the Bulgari Hotel has risen on the North Bund in Shanghai, is a prime example.
When the hotel began to be built on the banks of the Suzhou Creek in 2012, the label of Bulgari's top luxury brand made the Suhe Bay site famous, causing land prices to soar year after year, and OCT also got the key to leverage real estate sales, commercial complexes and other businesses.
▲ Bulgari Hotel has made the Suhewan plot famous, picture / Screenshot of AutoNavi map
However, the hotel has been built for five or six years, and after opening in June 2018 for more than a year, it encountered the epidemic again, and under the superposition of risks, the former real estate giant OCT A ushered in its first loss in 2022, and its subsidiary, OCT (Asia), the owner of Bulgari Hotel Shanghai, has been losing money since 2021, and will face a debt of nearly 9 billion yuan in 2023.
Anyone who has played the game Real Estate Tycoon knows that no matter how good and valuable an asset is, when the time comes to cash flow, it is time to sell it or sell it – this is the only way for players to stay at the table.
In 2022, OCT (Asia) first sold 51% of the equity of Bulgari Apartment, which is adjacent to the hotel, at a price of 612 million yuan, just to recoup funds. At the same time, the Bulgari Hotel was also quietly put on the sales schedule until the end of 2023, when it was sold at a reserve price of 2.43 billion yuan.
As for the benefits of the sale, the seller made it clear – it can revitalize the company's assets and accelerate its turnover, the cash generated from the sale can be used to repay loans and borrowings, and the group's interest-bearing liabilities can be reduced. In the end, through this move, OCT (Asia) earned about 57 million yuan.
Owners who sold five-star hotels at the same time considered much the same. When Jin Mao Beijing Real Estate sold the Westin Beijing, China Jin Mao announced that "this is a good opportunity to achieve overall hotel sales at a reasonable price under the current market conditions". The cash flow and profit from the disposal will be used to optimize the Group's overall financial position and working capital.
On the other hand, the buyer who took over the offer was a different atmosphere.
The new owner of Bulgari Hotel Shanghai, Jiangsu Jinfeng Cement Group, is the largest cement production enterprise in Jiangsu Province and the largest single cement production base in China. Three months before spending 2.43 billion yuan to acquire Bulgari, Jinfeng Cement had just acquired the Sheraton Shanghai Hongkou Sanzhi Hotel for 1.643 billion yuan, and the two locations were only 2.5 kilometers apart. The "cement king" swept the goods on the beach, which once became the hottest topic in the circle.
People familiar with the matter told Phoenix.com that Jinfeng Cement took 10 billion yuan of bank credit to buy real estate, and the price is the factor that buyers care about the most, "The hotels and office buildings for sale in Shanghai have basically been checked." But this time the buyer is not in a hurry to make a move, "their current strategy is to buy if it is cheap, and talk slowly if it is not cheap." The person also revealed that when Jinfeng Cement acquired the Shanghai Bulgari Hotel, the other party's offer was more than 3 billion yuan at the beginning, but in the end, it was more than 2 billion yuan.
Before that, Bohai Runze, which took over the Westin Beijing Jinmao Hotel, has a more mysterious background. This business management company was just established two months before the transaction, with a registered capital of only 50 million yuan, but a takeover price of 2.8 billion yuan, and the shareholders behind it are two natural persons, Shi Cui and Su Fu Snake. The Economic Observer learned that behind the two is Zhonghui Group in Fugu County, Yulin, Shaanxi Province, which is a typical coal enterprise engaged in coal mining, coal washing, coal chemical and other businesses, and has also developed real estate projects in Fugu and other places.
The resurgence of energy and coal bosses also marks a new era of investment in five-star hotels. In Zhao Huanyan's view, whether it is a "cement tycoon" or other enterprises engaged in cross-border investment and the acquisition of hotels, they all hope to pursue medium and long-term benefits through excellent properties and enrich their diversification strategies.
However, not all assets can find a receiver, and there are many hotel assets that are "smashed in hand". Compared with five-star hotels in first- and second-tier cities, which have more room for value-added, five-star hotels in lower-tier cities are more difficult to sell.
According to the official website of Ali Asset Judicial Auction, on March 7, 2024, the nine comprehensive real estate and appurtenances of the Hilton Hotel located in Jinghe Street, Hunchun City, were auctioned at a price of 45.5328 million yuan, and finally failed to be auctioned because no one bid.
In March 2023, the building and assets of Hefei Yuanyi Hilton Hotel and occupied land, equipment, inventory, intangible assets and other assets started at a price of 613 million yuan, and finally failed to bid because there was no bid.
▲ The Hilton Hotel located in Jinghe Street, Hunchun City. Photo / Ctrip
The hotel was downgraded, and the lobby became a "holy place of enlightenment"
The owners behind it have changed, and so has the five-star hotel itself.
In the past few years, Lin Can obviously felt that the attraction of five-star hotels to her had declined, "In the early years, when I went out to play and wanted to live better, I could only choose five-star hotels.
But the fundamental reason why Lin Can is no longer obsessed with choosing a five-star hotel is that "the cost performance is not so high". Most of the ordinary five-star hotels in the urban area have a uniform style, older years, no business needs, she prefers to live in a suburban hotel with better scenery, "many new high-end resort hotels, the service and facilities are no different from the five-star hotels, more distinctive, and the price is cheaper."
When five-star hotels are becoming more and more popular, the aura of "face" and "style" attached to it is quietly dissipating.
On social platforms, complaints about the old facilities of five-star hotels and the decline in service quality are gradually increasing, "there is no whole-house intelligent system, there is no automatic robot delivery, the bathroom cannot be separated from dry and wet, and the central air conditioning can only be uniformly adjusted" and other details have become a common problem of old high-star hotels.
A more obvious shift occurred in 2018, when blogger "Mr. Hua Lost the Golden Hoop Stick" released a video titled "The Secret of the Cup", which revealed that the health of many five-star hotels, including the Bulgari Hotel, was worrisome, and consumers' trust in five-star hotels was greatly reduced.
▲ "Mr. Hua" released "The Secret of the Cup" to expose the health status of the five-star hotel. Picture / Weibo screenshot
In the past, executives of top-level large companies, financial industry professionals and celebrities were the most loyal customer groups of five-star hotels. Just like "Flowers" Li Bao always has a long private room in the Peace Hotel, Daniel Zhang, the former chairman of the board of directors of Alibaba Group, has lived at the Sheraton Hangzhou Hotel for more than ten years. Many of the world's top 500 foreign companies will also require employees to live in five-star hotels on business trips, which is also an extension of the company's dignity to some extent.
But now the trend of the times is changing, and many five-star hotel regulars are also facing the embarrassing situation of "can't afford to live". Zhang Sheng, the manager of a financial company in Beijing, has always been the norm for business trips in five-star hotels, but at the end of 2023, during a work trip to Hangzhou, he found that the hotel he stayed in had changed from JW Marriott to a four-star hotel. The company's administration tactfully reminded him that "everyone's business travel standards have been lowered by one notch".
As the impact of the epidemic gradually dissipates, the hotel and tourism industry is also picking up, and many five-star hotels that have experienced heavy losses before have also launched "self-help" packages. At the end of 2023, "spending 12,888 yuan to get a five-star hotel buffet annual card" rushed to the hot search, and some netizens shared the life of checking in at the buffet at MGM Qingdao Hotel, and now it has lasted for 145 days, and the average daily meal fee has dropped to 88.8 yuan.
There is more than one five-star hotel that sells all kinds of annual cards, and well-known hotels in Beijing, Shanghai, Suzhou and other places have launched breakfast annual cards of 6888 yuan and 8888 yuan, and hotels have found another way, cooperating with well-known local tea estates to launch special tea afternoon tea, priced at 298 yuan per customer.
There was also an unexpected turn on the road of downgrading and sinking of five-star hotels.
In the metaphysical wave of "work is better than incense", the lobby of many luxury hotels has unexpectedly become the first choice for many young people to "gather wealth" and "enlighten themselves". They won't go to the front desk to spend thousands of dollars to check in, but they will go to the café next to them to order a cup of coffee for dozens of dollars, and sit for an afternoon. Unlike the Starbucks crowding migrant workers outside, the lobby layout carefully designed by feng shui masters, the fountains and koi ponds that flow water to generate wealth, and the high-end business people who come and go can all become part of the "wealth transfer".
On social platforms, someone posted a photo of the InterContinental Hotel in Xi'an, saying that "when you are unlucky, come and sit more and improve your energy field and frequency", and someone responded in the comment area: "In order to have a good start in 2024, I specially booked Xiamen Hilton to sleep for one night on New Year's Eve, and checked out in the afternoon to go to Putuo Temple, feeling more peaceful."
A person who often works in the lobby of a five-star hotel complained, "Every time I go to a café, I feel that I can't make money when I look at the boss of the literary and artistic style and the cramped table and chair environment", and ordering a cup of coffee for 30 yuan in a five-star hotel, with the splendid decoration, "just looking at it makes me feel more hopeful in life."
However, in the view of senior hotel practitioners, compared with the daily consumption of tens of thousands of yuan in hardware and labor, the revenue of various self-service annual cards and afternoon tea is still a drop in the bucket, and more far-reaching considerations may be needed to alleviate passenger flow anxiety and business pressure.
"In fact, around 2014, when the domestic five-star hotels were launched on a large scale, there was a wave of high-star hotel sales, the reason was nothing more than the restriction of the consumption of the three publics, the unprofessional hotel operators led to losses, and the real estate developers returned funds. Zhao Jiexiong sighed: "The ups and downs of the industry are not uncommon. ”
(At the request of the interviewee, Lin Can and Zhao Jiexiong are pseudonyms)
Resources
[1] Times Finance, "Five-star Hotels Sold Out"
[2] Economic Observer, "The Coal Boss Returns to "Hunt" Real Estate
[3] Phoenix.com Finance, "10 Billion, Buying the Bottom of "Shanghai Beach"?
[4] Economic Observer, "Assets that are difficult to buy back after being sold are on the shelves"
[5] Titanium Media "Why are central enterprises Jinmao and OCT selling hotels?"
[6] Chen Siwen, "The Past of Chinese Hotels"
The article is the original work of Daily People, and infringement must be investigated.