5-Star Hotel Boom, But What Happens After October 2008?

I've been thinking about posting on the huge influx of new hotels in Beijing and Shanghai and a recent post on All Roads Lead to China, discussing construction in Shanghai along Nanjing West Road around the Kerry Centre, reminded me of my intentions. The Kerry Centre will soon be surrounded by 3 or 4 new 5-star hotels, with offerings from Swissotel and Shangri-La. Not to be outdone, Beijing's CBD will include a Grand Hyatt and a Mandarin Oriental (among others) before the Olympics. The western part of Changan Road in the new "Financial District" also includes a number of brand new 5-star hotel offerings. 5 years ago you could stay in a 5-star establishment in these cities and pay around US$100 a night, an unbelievable bargain. While you can still find some prices around US$150, they're quickly rising to over US$200 a night and in some cases entering the rare air of US$300 (especially in Shanghai) for a standard room.

One of the great attractions to a China vacation in the past was that it offered a lot of bang for your buck, staying in nice hotels, eating great meals, and being able to see large numbers of world famous sights. While the airfare from the US or Europe wasn't cheap, in the end Americans would save a ton of money traveling to China instead of Europe and yet have a more luxurious vacation. Today, that's quickly becoming a thing of the past. The focus in recent years has been on luxury, luxury, luxury, and, especially in the leadup to the Olympics, the focus has been on high-end customers.

While there will be no problem filling these ultra-lux venues during the Olympics, will tourism in China suffer from a lack of mid to budget hotel options in the aftermath of the Games? Will the big brand 5-star establishments be able to continue raising their prices despite customers being spoiled for choice?

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