Hotelier abandons plan to hike prices

InterContinental Hotels Group has become the first international hotel brand to drop its price increase plan after government intervention, and the China National Tourism Administration has warned the hospitality industry against raising prices in the face of value-added tax reform.

After a meeting that the Shanghai tax authority held with four major international hotel operators－InterContinental, Hyatt, Marriott and Hilton－InterContinental pledged not to raise its prices after Sunday, when the VAT reform expands to the hotel industry, China Business News reported.

The meeting in Shanghai, where the four hotel operators have headquarters, came after they announced in mid-April that they would increase service fees on rooms to 21.9 percent from 15 percent. They cited concerns about the possible negative impact of the VAT reform.

Managers of the three other operators assured the Shanghai tax authority that they would "not add to consumers' burden", according to China Business News.

The response to the price increase plan illustrated the Chinese government's determination to safeguard VAT reform, a tax shift at the center of Premier Li Keqiang's supply-side economic reform, analysts said. The reform is meant to slash business costs to spur growth.

"The government is very serious about the reform," said Zhu Qing, a tax professor at Renmin University of China in Beijing. "It is natural that getting in the way of implementing the plan will not be tolerated."