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"Frankly speaking, the current booking rate didn't live up to our expectations," says Ye Bingxi, spokesman with Home Inns & Hotels Management Inc. "But we pay more attention to the long-term development rather than the near-term exposure around the Olympic Games."

According to the Beijing tourism bureau, as of the end of June, eight of ten Beijing's five-star hotels were fully booked for the Olympics, but at the four stars less than half the rooms were reserved.

Industry insiders say limited Olympic tickets, a stricter tourist and business visa policy and natural disasters were the main reasons for the empty rooms.

"Based on the number of sold- out tickets, there would be 300,000 to 400,000 overseas visitors for the Games in August," says Wu Jiang, project assistant with Service Department of 2008 Beijing Olympic Games organizing Committee. The number is far from industry experts' previous estimation, which predicted that half-a-million overseas visitors would attend the Olympics.

Besides Olympic-contracted hotels, ones near the Olympic venues are likely get better bookings.

"On average, 90 percent of rooms in hotels near the Olympic venues have been booked, even the economy ones," Wu Mingyuan, senior manager with the inbound service department of China International Travel Service, says.

Discounted prices and promotion activities have also helped lure customers.

In fact, many hotel managers are reluctant to offer discounts for fear of irritating customers who'd booked rooms at higher rates months before the Games. But Han Yi, deputy marketing director with GreenTree Hotel, says his hotel will reimburse customers who had booked rooms at premium prices before rates were discounted.

Rooms at GreenTree during the Olympics are priced at between 800-1,200 yuan.

"We will make up the loss for the customers. The current reservation rate for the Games in August is above 40 percent," says Han.

"Though our Olympics price is about three-to-four times higher than off-season rates, it's still much more competitive than many three-star hotels, where prices are at 2,000-to-3,000 yuan per room," Han adds.

To satisfy loyal customers, Hanting Hotels Inc offers a discount for those who use a certain credit card. The hotel also offers a book-three-rooms and get-one- free deal and many other budget hotels are offering similar deals rather than directly discounted rates. Other hotels are even providing free Olympic tickets in an effort to attract more bookings

Services have also been upgraded. Many hotels have developed more dishes to cater to the tastes of travelers from home and abroad and have trained staff in basic English language phrases and western etiquette.

The budget hotels say the current efforts are also preparation for a more intense peak season - the National Day holiday in October. "We predict a peak season after the Paralympic Games in September. During the National Day holiday more travelers can be expected," says Han.

It seems to be prevailing rule for many Olympic host cities that in-bound travelers increase heavily after the Olympic Games.

The new Olympic venues and improved infrastructure facilities have made Beijing more appealing but many price-conscious travelers prefer to avoid the city during the Games.

The Bird's Nest, the Water Cube and Olympic Village will be open to tourists soon after the Olympic Games. Recently, Beijing CITIC Consortium Stadium Operation Co Ltd won the rights to operate the Bird's Nest for 30 years after the Games. Plans call for it to be used for a range of sports and entertainment events and other commercial operations.

According to the World Tourism Organization, by 2010 China will surpass Spain and the United States to become the second most popular tourism spot behind France. By 2015 it is predicted that China will be the largest inbound travel market and domestic travel market in the world.

Though the future seems bright for the budget hotels, their profit advantage will be weakened if a fierce price war occurs and experts say it is due soon.

In July, real estate management firm Jones Lang LaSalle released a prediction report on China's hospitality sector in 2008 saying increasing costs will result in a set of major budget hotel merger and acquisition deals soon.

According to statistics, China's budget chains have developed from 30 hotels in 2000 to 1,700 by the end of 2007. So far, there are more than 100 brands of budget hotels operating in China, but only seven brands possess more than 50 hotels, including Home Inns, GreenTree Hotel and Hanting Hotels.

Though it's the trend to merge among less competitive budget hotels, the opportunities always carry risks.

In October of 2007, Home Inns, acquired its rival Top Star for 340 million yuan in a bid to consolidate its leading position in the domestic market. After the acquisition, the Nasdaq-listed company has reported a loss for three consecutive quarters ($7 million in the first quarter of 2008).

"The booming demand is still the main driver of the development of budget hotels and the loss will be temporary for Home Inns," says Gui Kai, the tourism analyst with Guodu Securities.

(China Daily 08/04/2008 page3)