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LAST WORD: The Most Recession-Proof Subsector of China's Hospitality Industry
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The Most Recession-Proof Subsector of China's Hospitality Industry

By Andrew Smith

BT 201603 05 Last word 001Anyone who has been lurking around this part of Asia for a while knows about the so called 'love hotel' industry. But just for the sake of clarity, we're not talking about the all too ubiquitous seedy massage parlours; namely talking about the not so hidden away venues in which couples old and young can hire a room for a few hours in order to have some good old fashioned intimacy. This particular subsector within China's rapidly expanding hospitality sector has been going from strength to strength since the concept was imported from Japan a decade or so ago. Love hotels are now sprouting up all over the place, with more and more couples looking for ways to relinquish themselves of their frustrations.

One company that knows extra how to meet consumer (or perhaps more fittingly - 'consummater') demand is Beijing based Wan Ai Hotels. Since opening its first hotel back in 2011, the ultra-popular chain has established a solid customer base in the capital, as well as in Hubei's Wuhan, Yunnan's Kunming, Henan's Zhengzhou and of course right here in Tianjin. In a recent interview the manager of a Beijing branch of Wan Ai, Liu Baolong, said that his company were "plans to open a total of 20 new locations across different cities in China by the end of the year". In order to stay ahead in this increasingly competitive industry, Wan Ai differentiates itself from its competitors by investing in lavish decor - including special Hello Kitty themed roomed - and providing superlative customer service. Wan Ai staff members, all of whom are dressed in a nice bright pink uniform, are trained rigorously on everything from taking bookings to maintaining high levels of discretion.

While these love hotel franchises aimed at the higher end of the price range are enjoying a surging demand from sexually charged rich kids, so too are those whose facilities are aimed at the more money conscious customers. One of the many apartment blocks in Tianjin that has cheap love hotels everywhere you look is the notorious Cheng Ji building. This infamously seedy set of residential buildings is located on Nanjing Lu, bang in the centre of the city and 5 minutes away from Binjiang Dao shopping street. With excellent transport links and all manner of restaurants just a stone's throw away, Cheng Ji is well known amongst both Tianjin locals and long term expatriates for being a hot spot of mischief. One of the many hospitality entrepreneurs who operate in that location is a savvy local man who goes by the nickname Da Ge (big brother). After a long baijiu fuelled introduction ceremony courtesy of a mutual acquaintance, this self-styled 'landlord of love' told us that, amongst other things, business has never been better. He claimed that even if it is a quiet month for each of the seven apartments turned love shacks he and his colleagues collectively own he can make upwards of 200,000 CNY per month. He went on to say that now the Spring Festival has drawn to close and most people have returned to the city he expects profits to double, perhaps even triple.

BT 201603 06 Last word 002
Obviously the outlay of buying well-located properties in big Chinese cities and the increasing number of bureaucratic tricks one has to contend with in this market provide some barriers to entry. But from a financial perspective it is hard not to be blown away by the profit margins on these converted residential properties, most of which will probably have gone up in value substantially as well thanks to China's raging real estate bull market. Then there is the high scenario of large scale tax avoidance to factor in. Moreover, the day to day costs of hiring a cleaner and a receptionist in China are pretty slim. But as Emma Gongzalez of China Daily rightly points out, love hotels are so incredibly lucrative "because of their higher occupancy rates. Rooms in these places are rented for hours instead of days. This means a room can be occupied for four times within a 24 hour cycle".

BT 201603 07 Last word 003Economic aside, there are of course some fascinating sociocultural aspects to the love hotel phenomenon. There is some debate about what this booming industry says about Chinese attitudes towards unmarried couples spending 'quality time' together. On the one hand some observers are claiming that it is indicative of China becoming more liberal and open minded towards sex. Yet as others quite rightly observe, it is primarily the staunchly conservative views towards unmarried sexual activity that is forcing young couples to utilise love hotels in the first place. The fact that this niche service model has become big business within the space of a few years demonstrates that the traditional values of a society that still, broadly speaking, frowns upon couples living together before marriage are still pervasive. One has to assume that there is also an element of novelty, of trying something new and exciting that is driving demand highly. After all, who wouldn't want to spend a few hours getting loved up in Harry Potter themed hotel room?

Going forward it is going to be very interesting to see what happens in the Chinese love hotel industry. There are already signs that the short time room rental business model is forcing established hotel chains to slash prices in order to remain competitive. If hotel chains like Home Inn and Hanting want to stay ahead of the up and coming landlords of love then surely they are going to have to offer better rates. Otherwise we could see businessmen having solo stays in love hotels just to save a few extra yuan on their travel costs and so they can spend the night admiring the Hello Kitty wallpaper.


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