What’s in a star anyway? China’s economy hotel chains are booming and They are pushing out 2- and 3-star hotels; but at the top of the market 5-star properties are still growing fast, creating a polarised market.

　　What’s in a star anyway? China’s economy hotel chains are booming, gaining ground at the expense of star-rated hotels.

　　They are pushing out 2- and 3-star hotels; but at the top of the market 5-star properties are still growing fast, creating a polarised market. Chart of the week takes a look at the numbers, which show a sector undergoing dramatic shifts.

　　The overall number of star-rated hotels in China has declined since 2009, largely because the 2-star segment has lost over 2,000 hotels. Meanwhile, the high-end segment of 4-star and 5-star hotels has added nearly 370 hotels.

　　The drop in the number of hotels results from properties not meeting the standards required for the star rating, from closures, and from establishments opting out of the system that assigns the stars (the China National Tourist Association).

　　Economy hotels have expanded in numbers to around 10,000, mainly due to the construction of new properties, although the total includes some declassified two- and three-star sites.

　　In quality terms, economy hotel roughly correspond to a 2- or 3-star hotel, but they do not opt into the classification system. They focus on cleanliness, safety, convenience, value for money and brand.

　　According to an analysis by Credit Suisse economy hotel chains have a winning model over traditional hotels because they tend not to own the property, but they either lease the property or adopt a franchise model; they are also cheaper and generally smaller than traditional hotels, which makes it easier for them to manage costs and to expand chains rapidly.

　　Huimin Gu, deputy dean of the School of Tourism Management at Beijing International Studies University and author of the research paper The changing structure of the Chinese hotel industry: 1980–2012 told the FT in an interview that “the business models are tailored to Chinese market including localised products and service. The management team of domestic brands has deeper understanding of the Chinese market and communication is more effective without language and culture barriers… the cost of domestic brands is lower than the international ones.”