State-owned firms to shed hotel assets

13:31, January 27, 2010      

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China's tourism industry may benefit from a government directive ordering State-owned enterprises to shed their hotel assets and focus on their core businesses.

Tourism officials have expressed a strong interest in purchasing some of the government's hotels, as the plan unfolds over the next three to five years.

The State-owned Assets Supervision and Administration Commission (SASAC) made the announcement late on Monday, which involves an estimated 100 billion yuan in hotel assets.

State-owned enterprises whose core business is hospitality will not be included in the plan.

Hotels taken off the books of government-owned enterprises could be transferred for free to other State-owned businesses specializing in the hospitality sector. In addition, ownership could also be transferred via corporate agreements or public sales.

Tourism industry officials welcomed the news yesterday.

"We will keep a close eye on the plan's progress and act when the time is right," said Liu Pingchun, board chairman of Shenzhen-based OCT, China's main tourism organization.

But, "we will be very cautious and not make any final decisions until we have fully evaluated the quality of these assets", Liu said.

In late December, the State Council issued tourism development guidelines encouraging the industry to become more competitive through mergers and acquisitions.

It is estimated there are currently over 2,000 State-owned enterprises nationwide, across a variety of different market sectors, that set up their own hotels. Each firm owns more than one property. That unofficially makes the government the nation's largest hotelier, ranking way ahead of privately owned 7 Days Inn with over 300 hotels, and Home Inn, with a portfolio of over 600 hotels.

State-owned enterprises use their hotels for meetings, conferences and to accommodate high-ranking officials on visits. But the majority of State hotel properties are known for their poor management and inability to fill rooms.

One industry watcher says hotel management has only served to distract State-owned enterprises from their main businesses.

"The announcement will help State-owned enterprises to focus their entire efforts on strengthening their core businesses," said Li Xinjian, a professor with Beijing International Studies University's School of Tourism Management.

The news is also expected to bode well for the tourism industry as the economic downturn has forced many tourists to seek out more budget hotel accommodations.

Shenzhen-listed OCT, which owns several high-end hotels, hopes to add more discount hotels to its line up this year.

"The selling off of State-hotel assets would help us to speed up our portfolio expansion, so these types of properties are what we want," said Liu.

Huang Guoyue, a public relations official with China International Travel Service (CITS), one of China's main tourism groups, was aware of the governments plan and is interested in acquiring State-owned hotels.

Duan Qiang, chairman of Beijing Tourism Group is also enthusiastic about the plan. "BTG is looking new opportunities," he said.

Source: China Daily
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