Do People Still Care About the Stars? A Brief Account of the Hotel Industry Development in China

Once upon a time, when a hotel booking decision had to be made, there would be an inevitable question, “How many stars does the hotel have?”

But now, when people need to make the same decision, the question has been changed to, “Which brand?”

It has been only slightly over three decades since the star-rating system was adopted and established in China. This change reflects the drastic change in the hotel industry landscape and the market development in the country. This article discusses the main development milestones and disruptors to China’s hotel industry during the past four decades. These mainly include establishment of the star-rating system, the entry of the international hotel brands in China, the emergence and development of the budget hotel sector, and the recent emergence of the nonstandard hotel sector (e.g., Airbnb).

The hotel industry started to develop only after the reform and opening up of China at the end of the 1970s (Zhang et al., 2005) with an initial recorded number of 137 hotels (15,539 rooms). Having enjoyed favorable social and economic development in the country, the government pushed for the development of the hotel industry by establishing a star-rating system at the end of the 1980s (Yu, 1992), which broadly promoted the quality standard of the hotels and was commonly referred to as an important milestone in the hotel industry in China. Also, the government started to encourage external investment, allowing the entry of international hotel companies, which further expedited the hotel industry’s growth (Zhang et al., 2005). In 1992, there were 2,354 hotels (351,044 rooms) in records; among them, 1,028 were star-rated (Zhang et al., 2005). In the next 10 years, having stars became the objective for most hotels in China.

Since the establishment of the international hotel in China—Holiday Inn in Beijing in 1984 being a key milestone—global hotel companies rapidly found their way to the Chinese market, and in less than 10 years, most major companies saw their presence in the country increase (Wang & Sun, 2009). The international hotel brands have created a domestic versus international dyad in different aspects such as perceived quality and performance. Several scholars attempted to compare these two categories of hotels (e.g., Gu et al., 2012). The fast development speed of the international hotel companies in China was due to their asset-light business modes, mainly management contract and franchising, allowing rapid expansion with low investment. These global hotel companies broadly promoted Chinese hotels’ development and helped nurture a large number of domestic hoteliers (Wang & Sun, 2009). Due to various reasons, gradually and increasingly, many internationally branded hotels have opted not to take the stars in China.

The star-rated hotels attracted a significant part of the public attention until the turn of the century, when the budget hotel sector emerged (Ren, 2018) as a major disruptor to the hotel industry. The first budget hotel was believed to be the first Jinjiang Inn opened in Shanghai in 1997. Due to an innovative development mode (most companies adopted lease plus operation mode) and its good fit with the market demand, the budget hotel sector grew tremendously in the first two decades of the 21st century. The growth rate of this hotel sector kept at double-digits from 2005 to 2015, according to Ren (2018). The strong branding, extensive geographic coverage, affordable price, and a few other positive features of the budget hotels won over the mass tourists (Zhang et al., 2013). This development has led to a rapid decrease of one-, two-, and three-star hotels. By the end of 2015, there were 21,481 budget hotels on the record, far surpassing the number of star-rated hotels, which was only 11,282 (Ren, 2018).

The recent development of the sharing economy has further changed the hotel and lodging industry in China. According to Inntie (2020), by the end of 2019, there were 608,000 lodging providers (18.91 million rooms) in China. Among them, 338,000 were hotels (estimated 17.62 million rooms), including 10,284 star-rated hotels, the rest mainly being the recently emerged nonstandard lodging facilities such as Airbnb. Being referred to as the significant disrupter to the hotel industry (Guttentag, 2015), the sharing economy lodging facilities reflect mass travelers’ behavioral change in recent years. By the end of 2017, the number of nonstandard lodging facilities had reached 880,000 in China, and the number continues to grow, keeping a double-digit growth rate (Anon, 2018).

So, what’s next?

Supplemental Material

sj-pdf-1-jht-10.1177_10963480211020555 – Supplemental material for Do People Still Care About the Stars? A Brief Account of the Hotel Industry Development in China

Supplemental material, sj-pdf-1-jht-10.1177_10963480211020555 for Do People Still Care About the Stars? A Brief Account of the Hotel Industry Development in China by Lianping Ren and Jingjing Yang in Journal of Hospitality & Tourism Research