High-end hospitality’s change of approach bears fruit

Chinese restaurants have seen profits pick up again after they were battered when the leaders of the Communist Party of China introduced an eight point regulation in 2012 to improve the working style of government officials and curb extravagance.

The regulation has curbed banquets and recreational activities paid for using public funds. However, it left many high-end restaurants and hotels feeling the pinch.

To survive, restaurants have had to lower their prices, and hotels have sought to attract more wedding ceremonies and business meetings.

He Baogui, secretary-general of Beijing’s Food and Beverage Industry Association, said high-end consumption from 800 yuan ($122) to 1,000 yuan per person per meal was greatly affected by the rule, especially during 2014.

According to a manager at Beijing Tourism Group, the parent company of Beijing Hotel, the hotel’s sales revenue slumped from 350 million yuan in 2012 to 270 million yuan in 2014, with a 20 to 30 percent annual reduction.

“Until 2014, many thought the eight point regulation would just a temporary action. Then they realized it wasn’t and they would have to adapt,” he said.

Liu Guopeng, deputy general manager of Beijing’s roast duck chain Quanjude, said they condensed their menu twice in 2015 and 2016, deleting expensive dishes, such as shark fin and abalone dishes, and customized dishes were added in various outlets across the country to cater to local tastes.

Xiang’eqing, a high-end restaurant chain featuring Hunan and Hubei cuisines, closed three quarters of its more than 30 outlets across the country.

“We have stopped serving expensive seafood dishes and lowered the prices of other dishes,” said a manager surnamed He at Xiang’eqing’s branch on Gulou Outer Street, the only one that remains in Beijing.

On the menu, many options have labels with new prices ranging from 30-40 yuan per dish. There is also no minimum to hire a private room, which was the case previously.

Large hotels are now targeting wedding ceremonies and business meetings and seeking to expand into comprehensive complexes that comprise office buildings, apartments, meeting venues and shops.

“The rent from office buildings and shops can help to offset the impact of shrinking hotel and restaurant revenue,” said Wang Zhong, general manager of Grand Hotel Beijing.

Hong Tao, a professor of economics at Beijing Technology and Business University, said that over the past five years, the eight point regulation has not only saved public funds, but also forced restaurants and hotels to return to a more rational operational structure.

“In terms of increasing income and consumption potential, the food and beverage industry will become healthier and more sustainable if businesses are innovative in meeting the public’s demand,” he said.

Figures show that this seems to be the case, as China’s catering industry surged by 7.8 percent year-on-year to nearly 3.6 trillion yuan in 2016.