Hotels suffering from high labor costs

China's hotel market has seen poorer business performance this year due to rising labor costs and the economic slowdown, according to a survey co-released Thursday by a property consultancy and a hotel association.

The revenue per available room (RevPAR) of the surveyed hotels is expected to increase by 3.1 percent this year, much lower than the 10 percent growth in 2011, according to the research conducted by Jones Lang LaSalle Hotels and China Tourism Hotel Association.

The survey covers 251 hotels and hotel management companies across China, representing a total of 77,574 guestrooms.

In terms of star ratings, 41.8 percent of the hotels in the survey are rated as 5-star and 39 percent as 4-star, with the rest being 3-star, 2-star and budget or non-rated hotels. In terms of ownership, 49.4 percent of the properties are State-owned, 30.7 percent are privately owned, and the remainder are held under other ownership structures, such as joint ventures.

On average, labor costs took up 25 percent of the total operating income, according to the survey.

"As a labor-intensive industry, China's hotels need more employees than their counterparts in developed countries, due to the lower work efficiency of employees, as well as the lower level of technological automation," He Chao, senior vice president of Jones Lang LaSalle Hotels (China), told the Global Times Thursday.

"A lack of senior managers and the high employee turnover rate are significant concerns for hotel operators," said He. "Consequently, salaries in the sector have been driven to a higher level."

Some hotel owners also frequently change the foreign management teams hired to run the hotels, "due to poor profitability and a lack of local senior managers who are familiar with the Chinese market," Zhao Huanyan, chief consultant at SAO Hotel Solution Consulting, told the Global Times Thursday.

Weighed down by the economic slowdown and sluggish performance of Western economies, business performance has been particularly poor for hotels in South China, where a large proportion of the country's export-oriented enterprises are located.

The RevPAR of surveyed hotels in South China is expected to decline by 17.8 percent in 2012 year-on-year, according to the report.

Meanwhile, the number of hotels in second- and third-tier cities is likely to experience strong growth, with the compound annual growth rate of new hotels in these cities being estimated at 21.5 percent and 28.6 percent respectively, the report said.