万达集团扩张高档酒店

China's upscale hospitality industry has taken a hit in the past year as the government's frugality drive continues.

Official figures from the China Tourist Hotels Association suggests that business at domestic five-star hotels has shrunk by over 30% because of low occupancy and reduced rates.

But the grim outlook has inspired Wanda, one of China's biggest property developers, to make its presence felt in the luxury hotel industry.

Michael James Stevens, Vice President of Operations of Wanda Hotels and Resorts, explains.

"From our own view, to take over the hotels and manage them, we do not have the preparation for the time being. But I think we first have to show China and the world how good we can manage our own hotels. And when you have a great impression and we do the right profits, and good image and standards, then it's time to go out and manage other hotels."

Up till the end of 2012, most five-star hotels on Wanda's properties were managed by international hotel giants like Starwood, Hyatt, Sofitel, and Intercontinental group.

Wanda has been operating its own five star hotels since last year, with the company setting a target to open 50 five star hotels in China by the end of this year, 200 by the end of 2020.

Most analysts would gasp at this ambitious target. But Daniel Voellm, Managing Director of HVS Great China, said Wanda is already half way there with its many enviable assets.

"They have the capital to do so. It allows them to deploy their brand more rapidly to parts where they are not dependent on third parties or owners. I think that gives them the leverage, and also they use the complexes they own, which gives them access to prime real eastate sites that other companies are competing for. So it's sort of that they locked in already."

Voellm adds that Wanda's unique advantage as a landlord will help it through the Chinese government's frugality campaign, until China's rising middle class shows more interest in lesiure and travel.

Rupert Hoogewerf, who compiles the annual China's billionare list, said Wanda's expansion should not be read as xenophobic, but as an aggressive business move.

"I think the ambition of Wanda Hotel and Resorts is clear. They want to be a top player in China. As a large real estate developer, they have a lot of properties that they can either start with and give themselves a brand. if a property has been under performing, if the brands that they had previously had not met their management standards, and if they feel they can do better with their own brands, and then they can kick them out."

Hoogewerf says he wouldn't be surprised to see the Wanda hotel brand go global.

Earlier last year, the company bought the world's biggest cinema chain, AMC, making Wanda a dominant player in North American. In the same year, the company also won the right to develop a patch of land in central London, the first footprint of Wanda's expansion into the global hospitality industry.

For CRI, I am Alexander Aucott.