Challenges ahead for hospitality sector

SHANGHAI: China's hospitality industry represents tremendous potential but may face a number of challenges, a group of chief executive officers and industry watchers said on Monday at the 17th CEO roundtable, with the theme "Hotel and Tourism Development in China," organized by China Daily.

The most-cited challenges at the roundtable included talent recruitment and retention, inadequacy of infrastructure and a lack of travel-related policy support.

Facts and figures

"I believe that China is addressing a number of the issues we are talking about," said Christopher Bachran, president of Jin Jiang International Hotel Management Co Ltd and the honorary chairman of the roundtable.

In the mid-1980s, the international hospitality market was brand new in China with Shanghai, Beijing and Guangzhou as the primary locations, Bachran said.

Two decades later, in 2004, the revenue generated by China's tourism industry was estimated at 289.2 billion yuan (US$35.6 billion), accounting for 2.3 per cent of the country's gross domestic product, according to the World Travel and Tourism Council (WTTC).

In the same year, 109 million overseas tourists came to China, an increase of 19 per cent from 2003, and the number of Chinese travelling overseas was estimated at 28.85 million, an increase of 42.7 per cent, official statistics show.

The WTTC predicts that China will be the world's fourth-largest tourism market in the years to come.

The Beijing Olympics in 2008 and Shanghai's World Expo in 2010 are expected to bring even more impetus to China's hospitality industry, Bachran said.

Given the tremendous potential, the American Chamber of Commerce recently formed a travel and tourism committee to look at aspects of the market that need to be addressed, he said.

New revenue models

A common topic of discussion was how to do more business particularly at weekends, said John Northen, general manager of JW Marriott Hotel Shanghai & Marriott Executive Apartments.

"What we need to do is to look at ways to improve existing facilities that are available right now and people's awareness of those," Northen said.

Airport efficiency

Another common topic of discussion was airports, specifically delays in international arrivals of up to two hours in getting through customs.

"I know physically there are some challenges there, but I think still there can be an improvement in the human aspect of the service," Northen said.

Human resources

To help the hotel industry grow, Ralph Grippo, vice-president and area general manager of the Portman Ritz-Carlton Shanghai, thinks it needs more people.

"We need to have enough people and the right people, because the industry is all about people serving people," he said.

"I would love to see a pipeline - a vehicle to create employees for tomorrow; that is, people who truly want to be in the hotel business," he said.

Grippo believes these people will help promote the hotel industry.

"When people come to Shanghai, whether for business or pleasure or experience, if it's positive, they will tell the world. If it's negative, they will tell the world," he said.

Karel Hujiser, president and CEO of Asia Pacific for GE Infrastructure, a TOP partner of the 2008 Beijing Olympics, agreed the infrastructure industry suffers similar issue.

Besides the growing need for hotel personnel, the pool of experienced hospitality experts is diminishing, Bachran said. The Jinjiang group plans to open 16 hotels and inns in the next three years.

"In fact, we are putting our heads together to try to decide how we are going to staff those hotels," Bachran said. "I know there are hospitality schools in Beijing, Shanghai and Guangzhou, but I am not sure they will be able to address the need of the industry - the need for experienced mid-level management, experienced housemaids, room attendants, chefs and staff all across the area.

Compensation schemes, long working hours, staff transfer and other issues have not been properly addressed, he said

Ronald Chao, a partner with Deloitte, agreed that the people issue is one the service industry has been struggling with.

"When I first joined Deloitte, there were only 130 people," he said. "In September we had 1,000, and our goal is to have 2,000 staff in one or two years."

Then Chao quoted a joke by a colleague to illustrate the lack of qualified people: "If you want to find a lizard with three legs, you can't find them anywhere. But if you want to find human beings with two legs, there are plenty of them.

"We need a human capital pool that can serve our clients at a global standard," he said.

The root of the problem

But the education system seems unable to address the shortage. Bachran said vocational institutions are not putting out enough students.

When asked what was missing in vocational education in a conference held in Beijing, he said he was worried about the practical aspect of training.

"I said you can give students the ability to learn from the textbook, but I don't know how you put that into the type of practical experience employees have to go through," Bachran said.

He endorsed a practice by a university in Guangdong Province, a three-year programme with the first two years spent in school and the last year in the field.

Bachran believes a combination of university education and experience would better suit the real working environment.

"But they produce only 120 graduates each year; that's not very many," he said. "We need a lot more."

Chao, however, does not pin his hopes on vocational schools.

"Relying on vocational schools to train the people you need is a pipe dream," he said, adding that vocational training is looked down upon as secondary or inferior in China and the markets all want to get people from the universities.

"Unless you can persuade Fudan University and Jiaotong University to have hospitality courses, you wouldn't get the cream of the crust," he said.

Chao said his company's solution is to set up its own institute.

"By training them to be global participants, we get to retain them," he said.

Deloitte has been recruiting employees from the country's leading schools and compensating them well. Chao said young employees are willing to face challenges and work hard, so "we just entice them to be global accountants."

Chao said investing in employees has paid dividends.

"Unless you invest in your people and honestly treat them as assets, you will always be fighting in the industry," he said. "It's only through this investment that you will be able to catch up."

The war for top talent

David Travers, vice-chairman of International Branded Hotels Shanghai and general manager of the Intercontinental Pudong, agreed the lack of qualified, experienced people is the industry's biggest challenge.

Travers said many of his staff leave them not for other hotels, but for other industries, as the hospitality industry is no longer viewed as highly as it was a generation ago.

Bachran agreed, citing a study that showed that up to 60 per cent of graduates from hospitality training schools do not stay in the industry.

For Peter Alatsas, general manager of the Westin Shanghai, one way to retain staff is to offer competitive compensation schemes.

"We have been adjusting salaries anywhere between 15 to 20 per cent year-on-year for the past three years, and we will probably continue to do that," Alatsas said.

Regional tourism in context

Shanghai lacks convention centres compared with its Asian competitors such as Singapore and Hong Kong, Travers said.

"Even though there are many hotels, the capacity of those hotels is quite limited for major regional, global conferences and minor activities that are held on a regular basis, which are major revenue generators," he said.

But Shanghai is not alone in its lack of quality convention facilities; many Chinese cities lack them, said Paul Woodward, regional manager of the Global Association for the Exhibition Industry in Asia Pacific.

Woodward noted there is only one medium-sized world-class convention centre in Shanghai, located near the Oriental Pearl Television Tower.

On the other hand, China has more exhibition facilities than Japan. Shanghai, in particular, has five exhibition centres.


If the issue of infrastructure is not tackled soon and properly, Woodward said, the Chinese mainland will face strong competition from smaller regional players such as Macao.

Everybody in the industry should be looking at how the rather large facilities that are being built in Macao will affect all of you in terms of the flow of the Chinese domestic tourism," he said.

Infrastructure aside, other issues affecting the image of China - and Shanghai in particular - such as worsening traffic also need government support, the participants said.

Erik Rufer, general manager of Ramada Plaza Pudong Shanghai, pointed out the difficulty of getting a taxi in Shanghai.

"I'm grateful that taxis are cheap. But with the rate having not been changed for years, taxis are becoming like public transport," he said.

"We hotels will do our part, but we need government people to do their part, too," said Roger Fung, general manager of the Renaissance Shanghai Pudong Hotel.

Sustainable tourism

Bachran raised the concept of "sustainable tourism."

"It is something that we all need to be aware of," he said, "because if we don't know how to develop sufficient and qualified talent, how to treat tourism, how to treat hospitality, how to treat our world and our surroundings, then I think we will be in a difficult time 20 years from now."

(China Daily 11/16/2005 page11)

Copyright 2004 by All rights reserved.