assessment of the hotel rating system in china

Assessment of the hotel rating system in China

Liu Zhan-Qing and Juanita C. Liu

In 1990 China began systematically to rate tourist hotels with a hotel star rating system. This article examines the standards and methods of the rating system to assess its potential as a management tool to establish national hotel standards, improve service quality and strengthen the hotel administration process, To assess the Chinese system according to international standards, it is compared with the widely used Amer- ican Automobile Association diamond rating system. This study discusses the progress in achieving a greater degree of standardization and professionalism in the hotel industry. Operational and procedural limitations of the rating system are also pointed out, along with a number of recommendations to improve scoring and streamline the process. This could lead to significant improvement in the management, marketing and planning of the Chinese hotel industry.

Juanita C. Liu is Professor of Tourism Management and Liu Zhan-Qing is a graduate of the Master of Professional Studies Program (MPS) at the School of Travel Industry Management, University of Hawaii, 2560 Campus Road, Honolulu, Hawaii 96822.

Acknowledgement This article is based on research for Liu Zhan-Qing's MPS monograph. The au- thors would like to acknowledge the China National Tourism Administration for the provision of data with gracious assistance from Judy Li. Submitted September 1992; accepted January 1993

~Jian Zhao, 'Over-provision of Chinese hotels', Tourism Management, Vol 10, No 1, March 1989; Clem Tisdell and Jie Wen, 'Foreign tourism as an element in People's Republic of China's economic development strategy', Tourism Management, Vol 12, No 1, 1991, p 62.

continued on page 441

In 1990 the China National Tourism Administration (CNTA) established a formal hotel star rating system as a management strategy to establish national hotel standards, improve service quality, and streamline the hotel administration process. This study focuses on the effec- tiveness of the Chinese rating system as an administrative strategy to improve guest service and build market confidence in China.

While there has been tremendous growth in China's hotel industry in the past decade, there are a number of acknowledged challenges to further progress. One obstacle is the lack of coordination in hotel administration due to the complicated bureaucratic and financial structure. 1 Another problem is conflicting policies of decentralization versus maintaining central control. Further, there is wide variation in the quality of hotel facilities and services owing to the lack of uniform hotel operation standards prior to the introduction of the rating system. Service problems are often attributed to an inexperienced work-force which needs proper motivation, professional training and appreciation of international standards. 2 Finally, marketing and planning is often conducted on a trial-and-error basis because of a lack of adequate and reliable information. Having realized its operational difficulties, CNTA eventually created its unique hotel rating system with the hope of providing strong leadership and consistent standards for the entire hotel industry. Although the intent of the rating system is to improve overall service quality and to improve market confidence, the ultimate priority is the consolidation of a hotel administration system which has been described as 'loosely organized and uncoordinated' . 3 By providing consumer information and creating marketing opportunities for hotels, the Chinese rating system also contributes to planning and administration of the hotel industry. 4

Hence, the purpose of this study is to assess the Chinese hotel rating system in terms of CNTA expectations to: (1) encourage full-scale service and quality as an ongoing strategy to improve visitor accommodation; (2) establish national hotel operating standards to meet the needs for international competition; (3) provide updated information on the quality, availability and distribution pattern of hotels as input for future hotel marketing, planning and management in China; and (4) establish CNTA as the central authority to oversee hotel development in the future.

World-wide hotel rating systems and implications for China Hotel rating is common practice in the lodging industry world-wide. International travel organizations have attempted to promote uniform

440 0261-5177/93/060440-13 © 1993 Butterworth-Heinemann Ltd

Source: Compiled from The Yearbook of China Tourism Statistics, China National Tourism Administration, 1980-90.

continued from page 440 2Dexter Choy and Chuck Gee, 'Tourism in the PRC - five years after China opens its gates', Tourism Management, Vol 4, No 2, June 1983, p 91; Zhang Guang-Rui, 'Tour- ism education in China', Tourism Manage- ment, Vol 8, No 3, 1987. 3China National Tourism Administration, 'Regulation of tourist hotel rating in China', A Collection of Documents for Hotel Rating in China, 1990, pp 6-12; China National Tourism Administration, 'Master plan of tourism development in China for the eighth five-year plan', Chapter 4, Tourist Hotel Development, February 1990, pp 28-30. 40p cit, Ref 3; Er-Fu Liu, 'Hotel rating and tourism development in China', Tourist Hotels in China, No 12, May 1990, pp 25-26. SP.A.L. Vine, 'Hotel classification - art or science?', Tourism Management, Vol 2, No 1, March 1981, p 19. 6Horwath & Horwath, 'Hotels of the future - strategies and action plans', London, 1988, p 18. 7Bob Brook, 'How good are hotel rating systems?', ASTA Agency Management, July/August 1989, p 28; World Tourism Organization, 'Chapter 3: Management in the accommodation sector', Report on the Development of the Accommodation Sec- tor, Madrid, 1985, p 56. aLawrence Yu, 'Hotel development and structures in China', International Journal of Hospitality Management, Vol 11, No 2, 1992, pp 99-110. 9Choy and Gee, op cit, Ref 2; Zhang Guang-Rui, 'Ten years of Chinese tourism - profile and assessment', Tourism Man- agement, Vol 10, No 1, June 1989, p 55; Tisdell and Wen, op cit, Ref 1 ; Yu, op cit, Ref 8. ~°Economist Intelligence Unit, China, EIU International Tourism Report, No 3, 1990, p 40.


Table 1. Hotel growth in China, 1980-89.

Year Hotels Rooms Beds Rooms/hotel 1980 203 31 788 44 241 157 1981 296 43 251 59 286 146 1982 362 51 625 75 423 143 1983 371 59 588 94 302 161 1984 505 76 994 171 888 153 1985 710 107 389 242 663 151 1986 974 147 497 332 321 151 1987 1 283 184 710 400 727 144 1988 1 496 220 165 478 321 147 1989 1 788 267 505 580 913 150

hotel standards. Since 1962 the World Tourism Organization (WTO) has exerted considerable effort to establish guidelines to work toward a standard international hotel rating system. 5 The International Hotel Association (IHA) has made similar attempts to develop a universally accepted hotel rating guideJ ~ However, efforts toward global acceptance have not been successful; the standards have mostly been used as a reference for establishing customized national rating systems.

The more than one hundred hotel rating systems used world-wide can be classified into two categories - official and non-official. 7 An official rating system is usually established and conducted by a government agency responsible for tourism or the hotel industry. This system is usually mandatory with regulatory capacity. Most countries, including China, use this type of rating system.

By contrast, the non-official rating system is privately administered by professional associations such as national automobile clubs, hotel associations or other forms of private trade organizations. It operates on a voluntary basis and rating service is mainly provided for members of the organization for purposes of publicity and consumer information. A typical example is the diamond hotel rating system conducted by the American Automobile Association (AAA).

The introduction of international hotel management chains, such as Sheraton, Hilton, Holiday Inn, etc., to China means higher expectations that accommodations and service quality reflect international standards. Since 1986 there has been an over-supply of hotel rooms because of rapidly increasing demand and government incentives, s Thus upgrading standards through improved coordination and standardization is necessary to meet the challenge of the international tourism market.

The hotel industry in China

During the last decade, the remarkable growth in China's international tourism and hotels have been well documented. '~ Room shortage in the early 1980s forced the government to provide economic incentives and favourable policies for hotel expansion, i~)The hotel business has grown into a sizeable industry with 1788 properties and 267 505 rooms catering to international visitors (see Table 1). Continuous capital investment has greatly improved the quality of accommodations with hundreds of modern hotels open to international visitors. A closer examination of the geography, capacity and ownership of the hotel industry in China shows a high degree of concentration in all these aspects.

Geographic concentration About 72'/o of hotel capacity is concentrated primarily in the major tourist cities along the eastern Chinese coast. Distribution of hotels and rooms, as well as average occupancies, in the top 13 provinces and municipalities can be seen in Table 2. In 1989 occupancies at these

TOURISM MANAGEMENT December 1993 441

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Source: Compiled from The Yearbook of China Tourism Statistics, China National Tourism Administration, 1990,

Table 2. Accommodation capacity for the top 13 Chinese provinces and municipalities, 1989

Location Hotels Rooms Occupancy ('%) Guangdon 9 541 65 886 ~J1 7 E}eijing 150 35 023 55.8 Shanghai 72 15 542 539 Liaoning 89 12 034- 56 3 Fujian 72 9 349 652 Shandong 66 9 136 570 Hebei 54 9 052 60.6 Guangxi 44 8 354 40.5 Anhui 63 7 730 597 Zhejiang 36 6 099 61 0 Jiangsu 35 5 903 49.6 Hainan 43 4 712 606 Tianjin 18 3 654 42 1 Total 1 283 192 474 National total 1 788 267 505 % of national total 72% 72%

locations ranged from 40.5% in Guangxi to 65., Y,, in Fujian. The overall average occupancy was about 56%, which is indicative of insufficient demand, or over-supply.

Size distribution and capacity

The size distribution of hotels in China is 45% having fewer than I()0 rooms (small), 44% having 100-299 rooms (medium), and 10% having 300 rooms or more (large) (see Table 3). Hence, small and medium hotels predominate with 89% of properties, but with only 67% of rooms. About 50% of all hotels are in the middle class category. Having mostly been converted from guest houses, they are often under-utilized and have poor occupancies. About 10% are in the luxury category, which grew rapidly in the late 1980s. Large hotels, particularly those with more than 500 rooms, are newly built and often joint ventures with much superior facilities and services.

Hotel ownership

Decentralization has resulted in a variety of different types of hotel ownership. II However, state ownership is still the dominant mode, accounting for 74% of total hotels and 71% of total rooms (see Table 4). Foreign involvement generally takes the form of either joint venture (share profit and loss according to rate of equity investment) or cooperative (share profit and loss according to contract management). L2 Foreign ownership constitutes 17% of hotels and 23% of rooms. Alternatives to state ownership are encouraged, but remain very limited.

11Tisdell and Wen, opci t , Ref 1; Yu, opci t , Ref 8. 12Economist Intell igence Unit, 'Foreign investment in China's hotel sector', EIU Travel & Tourism Analyst, No 3, 1989, p 90.

Political environment

Diversification of investment has occurred since the mid-198(ls when exclusive federal government control was extended to state government, local government, departments, collectives and individuals. This policy was called 'bringing into play the five sectors'. Although this policy resulted in intended acceleration of hotel development, it fell short in terms of national hotel planning. Lacking the necessary

Source: Compiled from The Yearbook of China Tourism Statistics, China National Tourism Administration, 1990.

Table 3. Distribution of Chinese hotel capacity, 1989.

Capacity (rooms) Hotels % Rooms % > 500 49 2.7 36 529 13.7 300-499 142 7.9 51 036 19.1 200-299 234 13.1 56 221 21.0 100-199 555 31.0 77 536 28.9 < 99 808 45.2 46 183 17.3 Total 1 788 100.0 267 505 100.0

442 TOURISM MANAGEMENT December 1993

Source: Compiled from The Yearbook of China Tourism Statistics, China National Tourism Administration, 1990.

AlSlg#S',s'me/tl o f the hotel rating s)'.stem in ('hina

Table 4. Chinese hotels by ownership category, 1989.

Type Hotels % Rooms % State-owned 1 328 74.3 189 206 71.0 State collective 12 0.7 2 124 0.8 Collective 145 8.1 15 063 5.6 Private 3 0.2 61 0.02 Foreign cooperative 161 9.0 29 965 11.2 Joint venture 138 7.7 30 31 t 11.3 Solely foreign 1 01 775 0.3 Total 1 788 100.0 267 505 100,0

expertise and funds to carry out its responsibility for hotel planning, the CNTA has been unable to coordinate and implement its policies. Being an agency overseeing a relatively new and rapidly growing hotel industry, it also lacks the authority to influence other more established government branches. Thus hotel rating is an at tempt to rectify this situation by giving greater authority to the CNTA.

Hotel star rating standards and rating method Currently, the hotel star rating system is applied only to government- cndorsed hotels that receive international visitors. Ratings of one to five stars are given according to quality of physical condition and service. Although the CNTA is the central government agency in charge of hotel rating, ratings of one- to three-star hotels are done by the local tourism bureaux. However , CNTA finalizes the ratings of three-star hotels and rates four- and five-star hotels.

The rating standards are designed to assess the overall hotel quality in terms of both physical features and services in the following six categories:

• required facilities and range of services: • quality of facilities and equipment: • maintenance; • cleanliness; • quality of service; • guest satisfaction.

The following is a brief description of the scoring procedures for each of these six areas.

Required facilities and range of services Standards for physical facilities and range of service are determined by availability of specified items in the following subcategories: hotel establishment, lobby area, facilities in public areas, guest rooms, restaurants, range of services and bars. Items in this section are not scored by points. Instead, differentiation of hotel stars is made through the quantity and type of facilities and awdlability of service items.

Within each of the above subcategories, detailed standards are specified. For example, under 'Facilities in public areas ' , a two-star hotel must meet minimum requirements for seven items including parking, elevator, air-conditioning, public phone, rest room, emergency lighting and a small convenience shop, A three-star hotel, besides those items required for a two-star hotel, must also have other facilities such as a ballroom, massage room, public reading/rest area, book shop, meeting facility, multiple-function hall and conveniences for the handi- capped.

Quality of facilities and equipment After it has been determined that a hotel has the required facilities,


Assessment of the hotel rating system in ('hina

Source: Compiled from A Collection of Docu- ments for Hotel Rating in China, China National Tourism Administration, 1990.

Table 5. Point allocation for facilities and equipment in the Chinese hotel star rating system.

Major area % Sub-area Points Exterior 7 Location 8

Surrounding 13 Establishment 6

Facilities 48 Lobby 33 Guest room 103 Bathroom 55

Food and beverages 18 Restaurant 41 Bar 18 Kitchen 13

Public facility 27 Sport 35 Recreation 31 Public area 21 Other 23

Total points 100 400

their quality is rated on the basis of quantity, quality and convenience to guests. Altogether, a maximum of 400 points are allocated to about 70 items in major function areas (see Table 5). For example, a colour TV set is required for even a one-star hotel, while the quality of TV is indicated by points according to the size of TV, eg 4 points for I~", 3 points for 16" and 2 points for 14". In the same manner, a guest room can obtain 10 points if it is above 20 m 2, while only 1 point is given if it is below 12 m z. Total points determine the star rating category. For example, out of the maximum 400 points for facilities, 220 points (55%) meet requirements for a three-star hotel, while 300 points (75%) are required for a four-star hotel (see Table 6).

Maintenance and cleanliness

Both maintenance and cleanliness standards are applied to 21 function areas such as lobby, guest rooms, restaurant, bar, sports and recreation areas and other public facilities (see Table 7). Within each area, more detailed items are identified and scored for level of maintenance and cleanliness. Note that the top items for guest rooms, restaurant and bar, corridor and elevator and lobby area comprise about half of the total points, implying that frequent guest-contact areas are given special attention. For the majority of areas, inspected items include doors, windows, ceilings, walls, carpets, furniture, lighting, air-conditioning, decoration and others. Standards for both maintenance and cleanliness are high since even one-star hotels must achieve minima of 90% (sec Table 6).

Quality of service Service quality is evaluated for eight subcategories including uniform and appearance (9%), front desk services (13%), guest room services (11%), restaurant/bar services (23%), function areas (35%), hotel reputation (2%), security (3%), and overall impression of services (4%) (see Table 8). The quality of service is determined on the basis of attitude, accuracy, efficiency and guest satisfaction. Like maintenance and cleanliness, the minimum standard for service quality is 90% (see Table 6).

Table 6. Minimum points for each hotel star category in the Chinese hotel star rating system.

Star group 1

Source: Compiled from A Collection of Docu- 2 ments for Hotel Rating in China, China National 3 Tourism Administration, 1990. 4 aNote: Maximum points and percentage for each 5 category. Max a bFigures in parentheses are percentages.

Quality of Guest facility Maintenance Cleanliness Services satisfaction

80 (20) 1285 (90) 1035 (90) 1215 (90) 14 (70) 120 (30) 1285 (90) 1035 (90) 1215 (90) 14 (70) 220 (55) 1314 (92) 1058 (92) 1242 (92) 15 (75) 300 (75) 1357 (95) 1092 (95) 1282 (95) 17 (85) 330 (80) 1357 (95) 1092 (95) 1282 (95) 18 (90) 400 (100) 1428 (100) 1150 (100) 1350 (100) 2 (100)


Source: Compiled from A Collection of Docu- ments for Hotel Rating in China, China National Tourism Administration, 1990. ~'Other facilities' includes a variety of health, sports and recreation facilities available in a hotel.


Table 7. Point allocation for maintenance and cleanliness in the Chinese hotel star rating system.

Items No. of items Maintenance Cleanliness inspected inspected points points Exterior of building 10 31 35 Lobby area 22 90 76 Guest room 28 268 200 Restaurant and bar 16 206 154 Corridor and elevator 4 120 130 Public bathroom 9 36 36 Fitness room 10 16 16 Sauna bath 11 25 25 Massage room 9 12 12 Swimming pool 6 15 26 Tennis court Overall effect 10 10 Shop 8 50 50 Business centre 9 10 18 Barber shop 11 48 34 Kitchen 7 53 51 Meeting room 11 30 25 Multiple-function room 11 28 26 Bookstore Overall effect f 0 10 Flower shop Overall effect 10 10 Ballroom 11 40 26 Other facilities a 12 320 180 Total 1428 1150

Table 8. Point allocation for quality of service in the Chinese hotel star rating system.

Areas/aspects of services Points % Uniform and appearance 128 9 Front desk services 182 13 Guest room services 145 11 Restaurant/bar services 310 23 Services in function areas 465 35 Reputation 30 2 Security 40 3 Overall impression of services 50 4 Total points 1350 100

Source: Compiled from A Collection of Docu- ments for Hotel Rating in China, China National Tourism Administration, 1990.

Gues t sati,sfaction

Guest satisfaction is also an integral part of the rating system. A 20-question survey obtains guest opinions about their satisfaction with the guest rooms, front office, restaurant and other function areas on a three-level scale, ic, Good, Satisfactory and Poor. Scores are computed by the following formula:

y = g + s/2 q

where, Y = satisfaction percentage; g = number of 'good' responses; s = number of 'satisfactory' responses; q = number of questions answered.

Questionnaires are distributed once a week for four consecutive weeks in all occupied rooms and the collection rate must not be lower than 3(1%. A hotel can be deferred from getting its star rating if the required satisfaction level is not met.

Criteria f o r star categories

In summary, the physical features of a hotel are determined by the availability of required facilities and range of service. The other five categories of quality of facilities and equipment, maintenance, cleanliness, quality of service and guest satisfaction are scored as explained above for a total of approximately 4348 possible points. Thus, this comprehensive quality assessment system enables detailed examination. On the other hand, this process is extremely time-consuming.

For each criterion, a minimum score level must be met in order for the establishment to be ranked at a certain star category (see Table 6). To ensure high quality for maintenance, cleanliness and service, 90% is the minimum level for even one-star hotels. Further, the difference between categories does not wiry by more than 5%. Sometimes, minimum scores are even the same for different star categories, as in the case of one and two stars, or four and five stars. These scoring methods limit how meaningful differences are among star categories.


Assessment o f the hole/ralinj¢ svslem in ( 'hma

Table 9. Comparison of physical and service categories of the Chinese hotel star rating system and the diamond rating system of the American Automobile Association.

Physical aspects Service aspects PRC star rating system: Hotel establishment Maintenance Lobby area Cleanliness Public area Service quality Guest rooms Guest satisfaction Restaurants Bars Quality of Facilities Range of services AAA diamond rating system: Exterior Housekeeping Public areas Maintenance Guest room decor Management Guest room equipment Guest services Bathrooms

Source: Compiled from A Collection of Docu- ments for Hotel Rating in China, China National Tourism Administration, 1990 and Lodging Diamond Rating Guidefines, American Auto- mobile Association, 1989.

Comparison of Chinese hotel rating with the AAA diamond rating s y s t e m

In order to evaluate the ('hinese rating system according to intcrnan,m- al standards, it is useful to compare its organization, rating tncthods and standards with the diamond rating system of the American Automobile Association (AAA). This system is chosen for comparison for the following reasons: (1) AAA's diamond rating is onc of the most accepted systems for itlternatiomtl hotel standards; (2) AAA's cmphasis on specifics and overall service quality is useful for comparing ('hina's method: and (3) although the design of the Chinese rating system is based on European and Asian hotel ewtluation systems, Chinese hotel operations are heavily influenced by American practices. Hcncc, using an American rating system is useful for practical purposes. A summary of the major differences between the two systems can be sccn in Tables 9 and 10.

Organization and purpose

Compared with the mandatory Chinese rating system, the AAA rating is a non-official system conducted by the world's largest motoring and travel organization. Membership properties, mainly from the USA and Canada, participate on a w)luntary basis. The purpose of hotel rating is to provide updated information on accommodations and services, which are part of member services, to improve travel conditions. In addition, it provides marketing opportunities for individual properties. For China's purposes, a mandatory system better serves its primary goal of providing a central authority with the responsibility for bringing about much needed standardization and coordination.

13American Automobile Association, Lodg- ing D iamond Rating Guidefines, AAA, Falls Church, VA, 1989.

Rating method

The AAA rating classifies properties into nine categories: (1) hotels, (2) motor inns, (3) motels, (4) country inns, (5) historical, (6) lodges, (7) cottages, (8) ranches and (9) complexes, according to their architectural styles and services. 13 Classification enables properties within a particular service category to improve their ratings without necessarily adding facilities. Instead of point rankings, qualitative ratings are assigned by the AAA's Committee on Accommodation, which reviews the inspection reports along with member comments and past records.

By contrast, the Chinese system does not distinguish between hotel types for rating purposes. It assumes that hotels in China are more homogenous since there are few automobiles and because of tile relatively short history of hotel development, along with predominantly pleasure travel, which has resulted in hotels that are concentrated in similar urban settings. The biggest drawback to having one standard for all properties is that properties cannot significantly improve their ratings without adding physical facilities. While this may be warranted in some

Source: Compiled from A Collection of Docu- ments for Hotel Rating in China, China National Tourism Administration, 1990 and Lodging Diamond Rating Guidelines, American Auto- mobile Association, 1989.

Table 10. Summary of major differences between the Chinese star rating system and the AAA diamond rating system.

Items Authority Participation Rating purpose

Rating method Scoring Inspection

Guest satisfaction Service requirement

PRC star rating system Official, CNTA Government agency Mandatory, all tourist lodgings Management, marketing national standards Rating without classification Mostly quantitative point system Large number of inspectors with short training sessions One of the decisive elements of rating General, list items, not specific actions

AAA diamond rating system Non-official, professional association Voluntary, AAA members Consumer information, marketing

Classifying before rating Qualitative, non-point system Small number of full-time hotel professionals with experience Informafly considered Specific action requirement


A.v~c~'xmenl o] ltw hotel raling .syxlem in ('hina

cases, it may not be desirable in terms of providing a balanced .nix of hotels for different market segments.

Rating standard,s" In the AAA diamond rating system, a property is evaluated on the basis of (1) physical aspects - exterior, public areas, guest room decor, guest room equipment and bathrooms; and (2) service aspects - housekeeping, maintenance, management and guest services. Corresponding items in the Chinese rating system can be seen m Table 10. Physical items are rated 'expected' , 'suggested', "acceptable', or 'detracting'. For example, for 'Lobby furnishings', seating areas are 'suggested' for two-diamond hotels but 'expected' for three-, four- and five-diamond hotels. On the other hand, swag lamps are 'acceptable" for two-diamond hotels but are rated 'detracting' for higher categories. Hence, certain facilities may not be appropriate for higher level hotels in the AAA system, while under the Chinese system the higher level hotels must include all the facilities of lower level hotels and more.

Perhaps the most notable difference is that while the Chinese system uses both quantitative and qualitative scoring for physical facilities, the AAA uses only qualitativc assessments. Anothcr difference in the service aspect is that the AAA rating includes management services, while the Chinese system tends to be more result-oriented by including items like cleanliness and guest satisfaction.

Moreover, the A A A system provides detailed guidelines for employee actions, in addition to requirements for expected levels of service. For example, under 'Guest reception', duties of the doorman are listed:

• open driver's door; • provide direction to front desk; • learn guests' names; • explain parking options; • extend friendly greetings: • promptly unload luggage.

By contrast, the Chinese system gives only a general description of tasks. For example, duties under 'Doorman service" are identified as "guest service, luggage attendance and reception'. Each item is then judged in terms of accuracy, attitude and promptness. Hence, service requirements are much more detailed, specific and action-oriented in the diamond rating system.

Assessment of hotel rating system in China The Chinese hotel industry has been influenced substantially by the mandatory rating system for tourist hotels, particularly through its regulatory capacity. Due to the recent downturn in tourism due to political unrest, some hoteliers may desire lower ratings to increase occupancies through lower prices, t towever, as tourism improves, as is indicated by a reported increase of 36°/, in the first half of 1992, it is expected that hoteliers will increasingly regard the rating process more positively. Ratings will give them the opportunity to increase their prestige, recognition and competitive advantage. Although the full impact of the rating system is difficult to assess at this time, preliminary observation and analyses show that important changes have already occurred in terms of improvement of facilities and services of hotels, establishment of national hotel operating standards, provision of a hotel databank and establishment of CNTA as a central authority for hotel development.


Assessment of the hotel rating sys'tem in ('hirer

Encouragement of lMl-scale service and quality as tm ongoing strategy I~J improve visitor accommodation

Improvement of facilities and services. Upgrading of facilities and services results from the new rating system, since most hotels find it necessary to install new facilities, to renovate or to provide additional service programmes in order to meet the requirements. Additionally, the stringent rating requirements have encouraged hotels to pay more attention to operations. Many hotels have initiated various training programmes to improve employee skills. Moreover, since each hotcl determines what level it will apply for, management is forccd to evaluate its resources, performance and future potential.

Finally, the new system has an economic incentive for improvement, since state-owned hotels with a rating recognition are entitled to collect an additional 10% service charge. ~4 Half of the money is contributed to a general fund for national promotion of hotels, while the other half is to be used by the hotels for training and employee benefit programmes.

Further limitation of the number of lower quality hotels. Preliminary results show that the majority of Chinese hotels are at the lower rankings. Out of the 901 hotels that have obtained their ratings, 63.7% (or 574 hotels) were in the one-star and two-star categories; 34% (or 306 hotels) were rated with three or four stars; and only 2.3% (or 21 hotels) received top five-star rankings. ~5 In the current situation of overcapa- city, it is possible to adjust supply to match demand simply by reclassifying some of the one-star hotels to accommodate the domeslic market where there is strong demand.

Accleration of nation-wide hotel renovation. Renovation is expected to continue to play an important role in improving the Chinese hotel industry. First, converted guest houses must be refurbished in order to achieve international standards. Second, newer hotels built in the early 1980s have been in operation for about ten years without adequate overhaul. It is estimated that, by the mid-1990s, about 30% of Chinese hotel rooms (80 000 out of the total of 267 505) will need to be renovated. ~6 The rating programme can accelerate the renovation process and enable the CNTA to work with local hotels to coordinate large-scale hotel renovation projects.

Establishment of national hotel operating standards for international competition

Improvement in standards of hotel operation. Implementation of national hotel operating standards has signficantly improved the degree of standardization and professionalism of the hotel industry in China and, hence, its international competitiveness. Eventually, it is anticipated that rating outcomes will be even more of a factor in setting hotel prices.

14CNTA, 'Regulation of tourist hotel rating in China', op cit, Ref 3, p 138. l~Xin-Zeng Wang, 'China has 901 star hotels', The People's Daily (overseas edi- tion), 16 May 1992. ~SCNTA, 'Master plan of tourism development in China for the eighth five-year plan', op cit, Ref3. 170p cit, Ref 8.

Creation of competitive business environment. China's economic structure and its open-door policy to introduce features of a limited market e c o n o m y will be increas ingly re f lec ted in hotel m a n a g e m e n t bureaucracy. 17 The rating of hotels will also contribute to an increasingly competitive business environment through greater accountability of individual properties. If properly managed, competition can be the impetus for greater cooperation and coordination, particularly in international marketing.

Development of training programmes to assist hotel managers. Even with specific standards and goals for service quality, hotels lacking sufficient


~SCNTA, 'Master plan of tourism development in China for the eighth five-year plan', op cit, Ref 3.


management skills may be uncertain as to how to achieve them. Hence, it would behoove CNTA to develop high-quality national training programmes for management and employees. This would counteract the misconception that only line position employees need training, but not the managers. Further, if CNTA develops qualification guidelines as a reference for key position managers, it would help with job selection and motivation. It is also desirable that tourism education departments allocate more funds to launch new management training programmes to augment existing programmes.

Development of Chinese hotel chain operations. The Chinese hotel industry is moving toward gradual networking, which requires continuous cooperation among individual hotels. The current rating system enables better consolidation of an emerging industry lacking consistent product, identity and performance. However, the hotel industry in China faces the tremendous challenge of a general slow-down of tourist traffic coupled with an over-provision of hotels. As each hotel is under severe pressure to compete for visitors, competition through internal price cuts can only result in loss for the industry as a whole.

The rating system encourages and facilitates cooperation through the development of Chinese chain operations, which could be further developed. Consolidated hotel management is a powerful tool to increase operational efficiency and thus competitiveness. Other benefits are market positioning through brand recognition and networking. In the past few years, there have been several attempts to establish hotel chains in China. Some of them are loosely organized for joint promotion activities while others are successful management companies with contracts in several major cities.

Provision of information database J?~r hotel management, marketing and planning in China

Coordination of hotel marketing activities. Although hotels affiliated with big international chains are able to provide world-wide booking service through their reservation systems, the vast majority of hotels in China are isolated operations unknown to international travellers. Some hotels mainly rely on year-round room bookings with a few domestic travel agencies like China International Travel Services (CITS) and China Travel Services (CTS), whose tour-package components are far from standardized. Hotel marketing and promotion suffers further from lack of experience and resources. The Department of International Marketing of CNTA has controlled less than $2 million worth of annual marketing budgeting in recent years.

With the ratings system, the marketing endeavour could be greatly enhanced. CNTA could publish a national hotel directory using the rating system for travel agencies, tour wholesalers and individual travellers. To whatever extent possible, CNTA could use fees collected to increase its national marketing programme. Hotels ranked in the same star category could also establish referral and reservation net- works.

Need for feasibility studies for hotel development projects. Since the rating system provides a complete inventory of available tourist hotels in China, it can be used to assist nation-wide hotel planning and development. Within the next five years, the government plans an addition of 20 000 new hotel rooms in some secondary destination cities. The annual growth rate is 1.6°/,,, which is substantially less than than the growth rate in the 198l)s. TM Ratings can help CNTA determine the


Assessment o f the hotel raling ,s3's'lem in (hirer

desired number e l hotels at each Sial Icxcl, thus l~iovicling a ,_,tlitic_. i<,~ the construct ion of new or renovat ion of existing hotels.

Establishment of a national hotel research system. I..Ising lhe dal'a Ironl the rating system, the CNTA could establish a national hotel dalabas,,' and research system which would provide information on availabilii\ , distribution, occupancies, quality and operational ratios to analyse the structure and performance of hotels. This would facilitate thc inf(~rma- tion needs for management , marketing, education and research in lhc hotel industry. It would also provide critical information for long-term hotel planning for the nation.

Establishment o f CNTA as the central authorio' for hotel develol, m'nt

Under the current system, the rating regulation designates only CNI 'A and its authorized local branch offices to grant hotel licences. This has resulted in greater control and coordination within the hotel industry in China. The rating system enhances CNTA' s central administrative authority for policy making. Through its licensing authority. CNTA must approve all new hotel projects. Combined with other types of market information, hotel rating could thus provide guidelines for needed facilities. Having a central authority is seen as the remedy for the lack of coordination and confusion resulting from a complicated system of hotel affiliation, ownership and financing, it then becomes possible to achieve a greater degree of master planning and overall administration.

While continued central leadership is seen as desirable for consistcn- cy's sake, clear lines of authority and responsibilities of government agencies need to be specified. In addition, channels for cooperation and communication need to be established and managerial and operational flexibility granted in order to achieve hotel goals.

In summary, China's tourist accommodat ion is expected to be further improved as a result of more experience with the rating programme. With its national standards, the rating system substantially enhances the potential for the Chinese hotel industry to meet international standards competitively. As an administration strategy, the rating system plays a decisive role in helping government oversee national standards, marketing, planning and future hotel development. The challenge is to overcome operational limitations by improving the rating system itself.

Operational limitations and recommendations There are a number of operational limitations that tend to hinder the success of the rating system, including requiring a uniform system for all hotels, inconsistent scoring requirements, unspecified service requirements, and a lack of incentives to maintain standards continuously.

The overemphasis on physical standards is due partly to the lack of classification of hotels for rating purposes. Hence, hotels of different service categories are evaluated on the same basis, even though they may be different types of operations. Most problematic is the fact that higher ratings are usually obtained through added or improved facilities. As a result, hotels may be motivated to install additional facilities required for that rating, whether or not they are economically feasible or appropriate. Finally, many of the conversions are undertaken without consideration of market demand. What is desirable is a balanced mix of facilities and establishments.

Fur thermore, many hotels respond to hotel rating with an isolated campaign to meet the government requirement. Before an inspection they may implement programmes such as 'five-day quality project ' or 'service week ' in order to achieve instantaneous results. What is needed


A.;,s'es,sment o f / h e tu>tel ratin L, s'ys/em in ('hina

are consistent and continual long-term operational hotel programmes with follow-up procedures to motivate employees and improve operations. With the aforementioned operational limitations in mind, four recommendat ions can be made to improve the hotel rating system.

Apply a classification scheme The Chinese hotel industry is diverse in terms of size, economic type and client base. Without a classification system, the current rating uses the same standards to measure vastly different types of establishments. Fur thermore, small limited-service hotels cannot earn a higher rating even though they serve their particular market segment very well. Rating without classification encourages hotels to concentrate more on facilities. Classification based on size, location and client base would enable each hotel to strive to he the best within its own class.

hnprove the scoring system For a number of items the minimum score requirement is extremely high, and the difference between star categories is minimal or zero (see Table 6). For example, even a one-star hotel needs to score 90% for maintenance, cleanliness and service quality. It is also questionable whether small differences of 2'7,, between two- and three-star hotels or 3'Yo between three- and four-star hotels are meaningful. In some cases, the same cut-off point is used between categories. For example, the maintenance and cleanliness items require scores of 90% for one- and two-star hotels and 95'7`, for four- and five-star hotels. Better incentives for improvement would exist with more meaningful differentiation between scores and more consistent graduated levels. Finally, some consideration should be given to simplifying the details of the scoring system so that it is not so cumbersome. The qualitative scoring system of the A A A could provide some practical guidelines for streamlining the Chinese system.

Specify quality and service guidelines While serving as a check-list for hotel inspections, rating guidelines are also valuable indicators of ways in which hotels can improve. The first two sections of the rating guidelines (Required facilities/Range of services, Quality of facilities) provide very detailed and quantitative standards. However , the rating system does not give meaningful guidelines in terms of maintenance, cleanliness and service quality. It simply lists areas or items to be inspected, but there are no specific standards in terms of what needs to be done to meet the requirement. The system needs to incorporate specific guidelines and be action-oriented in order to clarify expectations.

Maintain standards after rating Maintaining the expected standards after a hotel has obtained its rating needs to be stressed. In some cases, hotels can make significant improvements and manage to meet minimum requirements at the time of hotel inspection. However , a property may regress shortly after acquiring the rating without periodic follow-up inspections and other incentives.

In spite of all difficulties, the rating system has been implemented successfully and objectives are being achieved progressively. The rating system, however, must be reviewed and improved on a regular basis so as to guide the hotel industry properly.


Assessment of the hotel rating system in ('him~

Conclusion The hotel star rating system in China, as an administrativc strategy, has created a stronger and more unified central leadership which is expected to play a more decisive role in overseeing the planning, deveh~pment and administration of the hotel industry. Through implementation of the rating requirements, the Chinese hotel industry has gradually moved towards a greater degree of standardization and professionalism. The most notable results are: (1) improvement in service and quality in visitor accommodation in China, (2) establishment of national hotel operating standards, (3) a hotel database that has the potential for better management and development of the hotel industry, and (4) better central control and coordination of the hotel industry through the establishment of CNTA as the central hotel authority.

Despite these successes, there are a number of operational difficulties. A comparison with the American Automobile Association diamond rating system provides some useful insights. Rating without classification ignores the diversified nature of Chinese hotels. Inconsis- tencies in ratings and a complicated scoring system overburden thc rating process. Overemphasis on physical requirements encourages heavy capital investment in lieu of improving overall quality and services. Employees are not provided with sufficient guidance as to how they might improve their performance, since quality and service requirements are not specified. Finally, there is a lack of incentive for continuous maintenance of standards.

This study addresses these operational limitations by recommending the adoption of a classification system, simplifying and restructuring the scoring system, provision of quality and service requirements, and continuous monitoring and incentives to maintain standards.

The full potential of hotel rating can be achieved only if it is also included as a major management tool in the administration process. It is necessary to develop other supporting programmes to establish a consistent hotel management system. Steps can be taken to establish national hotel research and training programmes, to plan hotel renovation and new projects with better market information obtained through hotel rating and to integrate rating with the development of an improved marketing system and Chinese hotel chain operations, in addition, it still takes time for CNTA to delineate responsibility and coordinate comfortably with other government agencies. With its regulatory capacity and economic incentives, hotel rating can continue to be a significant motivating factor for ongoing improvement of Chinese hotels.
