Since he came to Beijing three months ago, Gan Shenghong has been busy with converting a former 3-star hotel into the 5-star Gehua New Century Hotel. At 8 o’clock every morning, the general manager of Beijing Gehua New Century Hotel Management Co. comes to check on the progress.
Last September, Zhejiang New Century Group and Beijing Gehua Cultural Development Group jointly established Beijing Gehua New Century Hotel Management Co., Ltd, by which Beijing Huabei Hotel owned by Gehua previously, was restructured. Both sides have agreed that Gehua holds a 51% stake, while New Century is fully responsible for operations and management.
With nine 4-star hotels and seven 5-star hotels, New Century Group has obtained a dominant advantage in Zhejiang’s hotel industry. Unlike cost-dependent manufacturers, the private sector in China seldom puts massive investment into deluxe hotels. Obviously, New Century Group led by Chen Miaolin is an exception.
Nevertheless, when New Century Group was developing its business in Zhejiang, other international hotel groups were busy with their deployment in bigger cities like Beijing and Shanghai. New Century hasn’t yet fought with any international hotel giant face-to-face on the battlefield.
Since most of New Century’s hotels are located in Zhejiang province, it has virtually no presence in Beijing, Shanghai or other major cities. Chen Miaolin, president of New Century, believes that to become a top-ranked deluxe hotel chain group, New Century has to enter mainstream cities on a large scale. Gan Shenghong, the resident manager of New Century’s flagship New Century Grand Hotel in Hangzhou city, arrived in Beijing in March this year, signifying the Group’s first major step outside Zhejiang province.
Marching towards First-line Cities
In 2005, Chen Miaolin opened three 5-star hotels in Zhejiang, and was voted Zhejiang’s “Leading Figure of 2005”. In the meantime, several New Century five stars are underway in Shanghai Songjiang Industrial Zone, Xuzhou of Jiangsu, and Ningbo of Zhejiang.
Like many other businessmen from Zhejiang, Chen Miaolin has had some legendary stories of success. In 1985, Chen who was then a government clerk was transferred to manage a local hotel. Unfortunately, the hotel service limited itself to providing customers with merely a bed and food. Chen was not satisfied and began to integrate entertainment.
“Chen was the first to operate bowling,” recalls Yu Guogang, the vice president of New Century Hotel Management Co., Ltd. “At the time, people even drove here from Hangzhou for a go.” Besides bowling, Chen also brought in go-carts, which have substantially boosted the hotel’s business.
Later, in 1994, Chen converted the business into a 4-star hotel with the help of a large bank loan. In 1995, Chen carried out another hospitality project, which made the hotel the largest and most luxurious holiday destination in eastern China.
In 1999 when the system of state-owned enterprises was under reformed, with a RMB 60 million (US$ 7.6 million) bank loan, Chen took over a dominant share of the hotels and anointed himself president with full power. However, considering the relatively small annual net profit, acquiring capital resources in order to attract massive investment was a major problem
Then, in that same year, the local government decided to develop a new district where Chen was expected to build a deluxe hotel. The hotel was expected to add value to the surrounding land with a better investment environment and enhance the city’s image. Although the new district was sited in a deserted rural area, Chen accepted the mission: New Century would build the best hotel in town. In return, he demanded a piece of land for real estate development.
In Chen’s view, real estate development is short-term and quick profit; conversely, the hotel project requires more time for construction, and investment return is slow but tends to be steadier. With the belief that 5-star hotel could add value to the surrounding land, Chen wanted to expand New Century’s brand resources and management capacity into real estate, and in turn use the profits from real estate to back up the expansion and development of the hotel business.
Eventually Chen acquired eight hectares of land; one third for the hotel and the rest for real estate. The housing business brought in hundreds of millions yuan in profit, which took a considerable amount of pressure off the need for capital.
With a 5-star hotel benefiting the city image and investment environment, as well as adding value to the surrounding land, Chen identified a joint-development approach, which he applied to the 20-hectare Qiandao Lake Holiday Village. The villas there sold well and the land in the surrounding area soared to 100 times its original value.
In 2005, of the RMB 2 billion (US$ 250 million) in New Century Group’s revenue, real estate business accounted for more than half, more than that of hotels. Chen regarded real estate business as a pillar of New Century, but the hotel business was the priority: in other words, despite the success of other ventures, New Century would be focused on hotel management.
