Ningbo hotel is first five-star site to fall into receivership

The Landison Plaza Hotel Cixi in the eastern city of Ningbo, Zhejiang province, has become the first five-star hotel in China to go into receivership after allegedly being hurt by the government's ongoing anti-corruption campaign.

Opened in 2009 and given its top-star rating at the end of 2013, its owners first hinted at trouble in November after revealing its parent company was seeking new investors.

Although still open for business, the hotel's owner Golden Harbor Tourism Company first applied to the local court for bankruptcy reorganization nearly a year ago, according to a court statement, as the hotel was effectively insolvent.

Wang Niancheng, director of Ningbo Weiyuan Certified Public Accountants, which has been appointed as the receiver, said on Thursday that the hotel has 450 million yuan ($72.26 million) in debt and still has to pay 23 million yuan in annual interest.

"The hotel made a number of wrong investment decisions," said Wang.

The collapse of the five-star site, say analysts, is indicative of the growing pressure on China's top-end hotels sector.

Statistics from STR Global, a consulting and research group based in the United States, show that the room rates of Chinese high-end hotels dropped 3.32 percent during the first nine months of 2014 compared with the year before, and rates of hotels considered "super-luxury" also dropped by 2.81 percent.

"The high-end hotel business will not be good in 2015 and we expect many hotels, including those managed by international brands, to lose money," said Ji Qi, CEO of the Huazhu Hotel Group Ltd, which runs a variety of properties.

The government's anti-corruption drive is being seen as instrumental in the tougher conditions, especially for the upper-end market, with many hotels previously relying on generous entertainment and business spending by officials.

The Alliance of China Conference Hotels released a report in December showing that the conference industry's total income from the public sector dropped from 36.3 percent in 2010 to 22.1 percent in 2013.

Experts said there is a growing oversupply of high-end hotels in the Chinese market, and with five-star sites opening across the country in recent years, the problem is wide spread.

Zhao Huanyan, chief expert at Huamei Consulting, a consulting firm for hotel industry based in Shenzhen, Guangdong province, said that some local governments had been especially keen to attract multinational hotel chains, as global names in town were seen as helping attract other international investment.

He said that many new hotels were funded with borrowed money, but as income has dropped in recent years, keeping up with repayments has become increasingly difficult for some owners.