Room at the inn

Harry Tan, 55, who owns the China franchise of the US hotels chain Days Inn with his twin brother David and younger brother Ted, 44.

Harry Tan, co-owner of the China franchise of the US hotels chain Days Inn, plans to open 500 hotels in the next five to seven years. [Provided to China Daily]

They have opened 35 hotels and plan to have 500 over the next five to seven years.

"There is a lot of room for growth in China still, particularly in the middle market where the customer need is," he says.

"There are still too many five star hotels. They are often built as part of a scheme because the developer can get more money for offices, residential apartments and retail space if there is a five-star hotel attached."

The ego of developers still remains a characteristic of the market with developers, often with local government backing, wanting to build grandiose hotels with little focus on the prospect of ever making a commercial return.

"I remember one developer coming to me wanting to build a copy of the Burj Al Arab hotel (which claims a seven-star rating in Dubai) by a lake in Hebei province," recalls Schmitt from Beijing Tangram.

"I told him I loved the idea but I said I didn't think anyone would come. It upset him very much. There are a lot of these vanity schemes. You see places where owners have to spend a lot of money just to keep a hotel going because someone made the wrong decision at the outset."

Some international brands, however, are not put off by unusual locations as they try and build a foothold in the market.

"We are coming across new projects all the time," says Humphreys from CBRE. "We were appointed to find an international brand for a development in Dongxing in Guangxi Province, just on the Vietnam border. It was two hours drive to the nearest airport at Nanning. We successfully completed a deal a couple of weeks ago. Things like that are now happening across the whole country."

Humphreys added it would be wrong to characterize modern Chinese developers as being naive or blinkered to the realities of running hotel operations.

"Up to three or four years ago a hotel developer would be looking for a Sheraton, a Hilton or a Marriott and would never look outside the top six brands," he says.