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Banyan Tree Beibei, Chongqing, photographed by the author.

Author | Yue Jiachen

Editor | Wang Weikai

Produced by | Prism·Tencent Xiaoman Studio

This is a luxury hotel that was once loved by internet celebrities. It is also the first hot spring resort hotel in China of the internationally renowned hotel chain "Banyan Tree". To this day, you can still see posts of young ladies checking in here on Douyin and Xiaohongshu.

However, unlike the excitement on the Internet, this hotel is facing the fate of being auctioned off.

Recently, the asset package of Chongqing Baichun Industrial Company located on Wenquan Road, Chengjiang Town, Beibei District was listed on Alibaba Asset Auction Website. The auction will start on September 2, with a starting price of RMB 700 million. The core asset of this asset package is Chongqing Beibei Banyan Tree.

"This auction actually has nothing to do with Banyan Tree." A hotel staff member explained to the Prism author that what was auctioned was the hotel's real estate, while the hotel's operating rights belonged to Banyan Tree, which in turn came from the Banyan Tree Hotels Group, which is headquartered in Singapore. Even if the real estate changes hands, the hotel will continue to operate.

In the past one or two years, news about five-star hotels being “sold off” has been common, from the Westin Hotel in Beijing, to the Bulgari Hotel in Shanghai, to the InterContinental Sanya Haitang Bay Resort…

However, just like the Banyan Tree in Beibei, Chongqing, what is being sold off is often the real estate of these hotels, which has little to do with the hotel brand. A public relations person from an international hotel group lamented to the author that they are often "caught in the crossfire".

The frequent changes in the ownership of hotel real estate are directly related to the shock of the real estate industry. Real estate developers used to be the largest owners of five-star hotels, but now that the entire real estate industry is in a period of decline, unprofitable hotels are the first to be put on the shelves by owners, and five-star hotels have also been pushed to a "crossroads."

The decline of Chongqing's No.1 hotel chain

"The hotel provides the stage and the residences provide the performance" was once the "wishful thinking" of the investors of the Banyan Tree Hotel in Beibei, Chongqing.

On the way to the hotel, you can see many real estate projects with the word "yue" in their names, such as "Banyan Tree", "Banyan Tree Residences", "Yuechun Forest Residences"... This makes people wonder, which one is the real "Li Kui"? A staff member of the Banyan Tree Hotel told the author that only the hotel is operated by the Banyan Tree Group.

The hotel was built by Chongqing Baichun Industrial Company, which is wholly owned by Chongqing Shenji Industrial Group. After completion, it was entrusted to Banyan Tree for management. Other "Yue" projects are residential areas built by the owner and have nothing to do with Banyan Tree.

At present, these real estate projects are not doing well.

Looking out from the hotel, there are unfinished buildings and uninhabited villas all around. One of the resort villas, called "Banyan Tree Private Residences", has its gates closed, weeds growing outside the entrance, and the road leading inside is covered with fallen leaves... According to a Banyan Tree staff member, when the villa project was launched eight years ago, the price of these villas was as high as tens of millions of yuan, but after the project was completed, few people lived in them.

The door of the high-end holiday villa "Banyan Tree Private Residences" is closed. Photo taken by the author.

The developer gave the property such a name, no doubt hoping to sell properties by leveraging the fame of "Banyan Tree". "International hotel + special property" is a tried and tested method used by developers.

The fate of this Banyan Tree Hotel being auctioned off is also closely related to the sluggish sales of villas.

Eight years ago, the housing price in Chongqing Beibei District was only 6,000 yuan/square meter, while the unit price of Banyan Tree Residences was as high as 40,000 yuan/square meter, and the total price of a villa was nearly 30 million yuan. The developer hoped to realize the project repayment through the sale of villas, but the high price positioning made the project unpopular in the market, which made the Forebase Group start to go downhill.

The author saw on an old map in the hotel that the building next to the reception hall was marked as a sales office, but there is no sales staff at present. According to the Banyan Tree staff, the sales office of Banyan Tree Private Residences has moved many times in the past few years and is now empty.

Finally, Chongqing Baichun Industrial Company, the developer of Chongqing Beibei Banyan Tree, applied for bankruptcy reorganization due to tens of millions of yuan in project arrears, and was ruled bankrupt and liquidated in August last year. As of the end of 2022, the company had total assets of 1.743 billion yuan, total liabilities of 1.972 billion yuan, and net assets of -229 million yuan.

In fact, Shenji Industry not only owns Banyan Tree Beibei, but was once known as the "No. 1 Hotel in Chongqing". It has successively owned a series of local landmark five-star hotels including the Westin Chongqing Jiefangbei, Sofitel Chongqing Shenji, and Days Hotel Chongqing Liangping.

At the beginning of 2022, the Chongqing Fifth Intermediate People's Court accepted the bankruptcy liquidation application against Shenji Industrial Group and declared it bankrupt in September of that year, confirming total debts of 10.76 billion yuan and asset value of 1.56 billion yuan.

That year, Chongqing Forebase Sofitel Hotel (later renamed Athestel Hotel) was put on the auction shelf. On June 20 last year, the court marked the starting price of Chongqing Jiefangbei Westin Hotel at 1.038 billion yuan. However, this five-star hotel, which was regarded as the "flagship of the mountain city", failed to be sold in the first auction because no one participated in the bidding.

The real purpose is not the hotel

Banyan Tree Beibei, Chongqing, which is in the midst of an "auction" storm, is not doing well now. The author saw very few guests in the hotel, and in order to save costs, the hotel also closed its buffet breakfast restaurant and switched to room service.

"Unlike five-star hotels in the city, resort hotels have distinct peak and off-seasons. During the off-season, it is difficult for hotel operations to be self-sufficient and they need to rely on subsidies from owners," a staff member of the Banyan Tree Chongqing Beibei explained to the author of Prism.

An industry insider who has managed the development and construction of a five-star hotel in southern China told the author that there is a consensus in the real estate industry that investing in a five-star hotel is not profitable due to high operating costs. An insider of a leading real estate company also said that in their company, five-star hotels are considered to be an "inefficient asset" with the longest payback period.

So, why have real estate companies been flocking to five-star resort hotels for a long time even though they know they are not profitable?

A real estate professional engaged in hotel development revealed to the author that real estate companies usually develop five-star resort hotels for ulterior motives. They do not expect these hotels to bring in substantial operating profits, but rather view the hotels as a source of traffic to attract customers, thereby boosting sales of surrounding residences.

Developers usually acquire land in bulk around hotels to build residential projects such as "sea view rooms" and "hot spring rooms".

“Some projects require the construction of supporting five-star hotels when they acquire land, which is one of the reasons for the skyrocketing number of five-star hotels in the past decade or so,” the person said.

The above-mentioned person who has operated a five-star hotel explained that when developers negotiate cooperation with local governments, the local government usually requires the construction of a complex of "commercial + five-star hotel + residential" and the introduction of luxury five-star brands of international hotel groups. The local government's "main purpose" is business and hotels, while the developer's "main purpose" is to acquire residential land.

"Real estate developers build five-star hotels not to make money from the hotels, but to get more residential land and make money from residential sales. It's not a big problem for the hotels to lose a little money," he said. He once calculated on the project that the hotel's 20-year return on investment was even negative.

In his opinion, "big picture" is the core logic of real estate developers investing in hotels. However, with the downturn in the property market, residential transaction volume has plummeted, and real estate sales can no longer "feed back" to hotels, and the previous "big picture" logic is no longer sustainable.

"If you choose to sell an asset, the core reason is that it can't make you money." A fund manager who has been paying close attention to the real estate industry told the author, "In the eyes of many real estate companies, hotels are a 'negative asset'."

A "coal boss" becomes the new owner of a five-star hotel

During the downturn of the real estate industry, the owners of five-star hotels also began to reshuffle. The private real estate developers that were once the main force withdrew one after another, and central state-owned enterprises and some mysterious individual buyers became the takeover parties.

In recent years, in addition to the Banyan Tree in Beibei, Chongqing, five-star hotels and resort hotels being publicly auctioned are not uncommon.

At the end of 2023, three hotel asset packages under Tianfu Group, including the Sanya Tianfang InterContinental Resort Hotel and the Tianjin Ritz-Carlton Hotel, were successfully auctioned with a total transaction price of 2 billion yuan, which was half of the original net asset valuation of 4.53 billion yuan.

Recently, the Sofitel Beijing Hotel was also put on the "shelf". The hotel trading website shows that the Sofitel Beijing Hotel located on Beijing's Chang'an Avenue was sold for 2.8 billion yuan. The hotel was originally an asset of COFCO Group and opened in September 2014. It was previously the W Hotel on Beijing Chang'an Avenue. However, since its opening, the hotel has been in a loss-making state.

Subsequently, the hotel was also taken over by Tianfu Fund. In January 2019, Marriott International and Beijing Tianfu Rongde Hotel (Beijing) Co., Ltd., a subsidiary of Tianfu Fund, officially terminated the operating service agreement for W Hotel Beijing Chang'an Avenue, and the hotel was renamed Sofitel Beijing.

"The management service fees of Marriott's W Hotel are very high. In comparison, the management fees of Accor's Sofitel Hotel are lower," said a Beijing hotel industry insider. Now, Sofitel Beijing is facing a change of ownership again, and the equity of Tianfu Rongde Hotel (Beijing) Co., Ltd. has been frozen.

In Beijing, the Westin Hotel on the East Third Ring Road also changed hands. Before October 2023, the hotel would still have the word "Jinmao" in front of it to indicate that it was an important asset under China Jinmao. After the change of ownership, the word "Jinmao" was quietly erased.

In Shanghai, many high-star hotels are also listed for sale, such as OCT (Asia) selling Bulgari Hotel Shanghai, Macrolink Group selling Sofitel Shanghai Macrolink Hotel...

In December 2023, OCT (Asia) announced that it had sold part of the assets of the Shanghai Suhewan project for 2.43 billion yuan. The asset is the Bulgari Hotel Shanghai. This ultra-luxury five-star hotel, which took six years to build and opened in 2018, is the sixth Bulgari Hotel in the world and the second in China. On travel websites, the basic room type of this hotel has a year-round room rate of 6,000 to 7,000 yuan, which is almost one of the most expensive hotels in Shanghai.

According to statistics from the third-party agency Maidian Research Institute, the number of hotels with auction prices of more than 100 million yuan will exceed 130 in 2023. So, who are the buyers of these five-star hotels?

Among them, three Tianfu Group assets including the Tianjin Ritz-Carlton Hotel were bought by a mysterious buyer, and the new owner of the Shanghai Bulgari Hotel is the Jinfeng Cement Group, the largest cement manufacturer in Jiangsu Province. Before acquiring the Bulgari, Jinfeng Cement had acquired the Shanghai Hongkou Sheraton Hotel for 1.643 billion yuan.

The “cement king” swept up the market in Shanghai, which became a hot topic for a while.

In addition, Bohai Runze, which took over the Beijing Jinmao Westin Hotel, was established just two months before the transaction, with a registered capital of only 50 million yuan. The shareholders behind it are two natural persons, Shi Cui and Su Fushe. The Economic Observer reported that the two natural persons are backed by a company called Zhonghui Group, which is engaged in coal mining, coal washing, coal chemical industry and other businesses in Yulin, Shaanxi.

In addition, the Shanghai Huangpu Marriott Hotel was sold to Bank of Beijing for RMB 1.488 billion, with plans to transform it into an office building; a 49% stake in the Shanghai Lujiazui Kempinski Hotel was purchased by a private buyer.

Hotels are being auctioned off, but InterContinental and Sheraton are still expanding

Hotels are frequently "sold off", but the revenue of major international hotel brands in China is growing. Take InterContinental Hotels Group as an example. In 2023, InterContinental Hotels Group's revenue in Greater China was US$74 million, a year-on-year growth rate of more than 105%, accounting for about 7% of the global total revenue.

In the hotel industry, the owners and the brands are usually separate. The owners are mainly real estate developers. R&F, Sunac, and Poly are the owners of major five-star hotels in China and bear the main losses. The brands include hotel brands under international hotel groups such as Marriott, Hilton, InterContinental, Hyatt, and Accor. They do not own the hotel property rights and their main source of income is charging fees for brand licensing and management services.

Although the owners are not having an easy time, the number of hotels in China by international hotel groups continues to expand.

According to data provided to the Prism author by the PR department of InterContinental Hotels Group Greater China, in the first half of this year, the number of newly opened hotels in Greater China increased by 49% year-on-year, and the number of contracts signed increased by 38%. As of now, the group has nearly 1,300 hotels opened or under construction in China.

Hilton Group said that this year, Hilton Group will achieve the development speed of opening more than 100 new hotels in the Chinese market every year for the fifth consecutive year. Currently, Hilton Group has opened its 700th hotel in China.

Owner resources are the key to competition among international hotel groups. An InterContinental Hotels Group official told the Prism author that unlike in the past when private real estate developers were the owners, many of the current owners are state-owned enterprises or even individual owners, as private real estate developers have gone bankrupt.

However, frequent negative news about the owners also brings troubles to the hotel brand.

An insider from an international hotel group in Greater China complained to the author that in recent years, news such as "Sheraton Hotel being sold" and "Banyan Tree Hotel being auctioned" have frequently appeared in newspapers. These are actually asset disposal actions by hotel owners and have nothing to do with hotel brands such as Sheraton and Banyan Tree, but hotel brands are repeatedly "caught in the crossfire."

"Many guests think that something has gone wrong with Banyan Tree. In fact, no matter how the owner changes, it will not affect the normal operation of the hotel." A manager of Chongqing Beibei Banyan Tree told the author. The manager further explained that when the owner introduced the Banyan Tree brand, they signed a 20-year contract, and now it has just passed the halfway point.

In addition, international hotels have also realized that it is difficult to maintain positive growth by relying solely on five-star hotels and resort hotels. Take InterContinental Hotels Group as an example. In recent years, it has opened up franchises for economy brands such as "Holiday Inn Express" and "Holiday Inn" in China, attracting small and medium-sized owners with a lower cost.

According to a person from InterContinental Hotels Group who revealed to the author, currently about 70% of the newly expanded hotels are economy brands such as "Holiday Inn Express".

International hotel brands such as Banyan Tree and InterContinental are also facing competition from domestic hotel brands. Previously, some private real estate developers began to gradually abandon cooperation with international hotel brands, changing five-star hotels to apartments and other formats with higher returns, or establishing their own independent hotel brands to start asset-light transformation.

"Private real estate developers may think that it is better to create their own hotel brand instead of entrusting it to international hotel groups and paying high management fees," said the InterContinental Hotels Group person.

Take Sunac as an example. In the early years, most of the hotels supporting Sunac Cultural Tourism City were entrusted to international brands such as Crowne Plaza for management. In recent years, newly opened hotels have used more self-created brands, such as "Songpin" and "Jinshan". Among them, "Songpin" is a brand created by a joint venture company established by Sunac and Huazhu Group. In addition, Wanda Hotel has also begun to expand its assets lightly, including its "Wanda Ruihua" and "Wanda Wenhua" brands.

However, the brand building of domestic hotels still has a long way to go.

In the list of “Top 50 Global Hotel Brand Values” released by the British brand evaluation agency “Brand Finance”, there are only four Chinese brands in the top 50, and only one in the top ten is Shangri-La, headquartered in Hong Kong, China.