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Chinese 5-star hotels are asking for downgrades so they can still host officials

Swanky hotels in China have found a way around rules that are meant to stop officials from spending public funds—or ill-gotten gains—on luxury accommodations: lose a star. Last year, a total of 56 hotels tried to downgrade their rankings to four stars. Over a dozen—including five owned by Chinese billionaire Chen Miaolin whose hotels are known for their private dining halls and karaoke and mahjong rooms—suspended their applications for a fifth star, according to Xinhua.

China’s high-end hotels are one of many once-booming industries that are now hurting under the Chinese Communist Party’s austerity campaign—another sign of how dependent the luxury sector is on the lavish habits of political elites. Last year, Chinese president leaders began enforcing a spending limit (link in Chinese) on officials travel accommodations of up to 600 yuan (about $100) a person for officials at the department level, eliminating most five-star hotels. Lavish banquets often held at hotels were also banned. As we reported, Chinese luxury hotels are now under triple threat from a crackdown on spending, as well as a slowing economy, and an oversupply of hotels.

Hotel revenue in China through April of 2013 was 16.4% lower than the year before as government meetings in hotels have dropped almost 40% from a year earlier, according to the China Hotel Association. Research firm STR Global expects slow spending (paywall) among business travelers as government-related business stays stagnant. As many as 20 hotels closed every month last year, China Tourism Association estimated. Some have been turned into more modest guest houses and at least one, in Tianjin, plans to reopen as a nursing home after Chinese New Year.

In some cases, hotels have simply lost stars because they couldn’t afford keeping up with previously set standards. In Fujian province several of 15 hotels were downgraded because of outdated facilities, poor service, and even bad decoration, according to Fujian province’s tourism bureau.

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