The economic situation in China is getting much more difficult for many companies, and the crack down on corruption is having a material impact on development as well as hotels and other areas where corrupt politicians spent their payoffs. The result is good for the US real estate business and other industries. It had been the case until recently that many Chinese developers wanted only five star hotels or big name brands.  They were cashing in on the money flow that came with corruption. Those in a position to collect payoffs would dine out, go to the best hotels and take their girlfriends to the best resorts. The banks would provide unending funding for these developments and to have a major hotel as part of a mixed use project became common. When I traveled to China a year ago to meet with hotel developers, it was invariably about five start properties, and the more luxurious the more they wanted it. Financing was no problem and there was a trend away from the big brands to try to differentiate themselves. The hotels once open often did not make a real return but they were status symbols. We were there to discuss management contracts, not ownership, as ownership made no economic sense.

Now with the crackdown on corruption, there is a major pull back by the people collecting the payoffs to not be seen out flashing the money the way they used to do. The big expensive hotels and the hookers are all having a much more difficult time finding business. The money flow to the developers has dried up. The failure to understand how to best operate the luxury hotels and make money is now come home to roost.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?


NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2024 ALM Global, LLC. All Rights Reserved.