Olympic Vacancies Haunt Beijing Hotels

Last year, management of the Red Hotel Beijing took over a drab Stalinist-era style hotel on the eastern side of Beijing and decided to give the old place a facelift. Located one block north of the stadium and arena scheduled to host the Olympic soccer and boxing matches, the hotel had a location that seemed a sure moneymaker for the Beijing games. So the Red Hotel invested $1.5 million to nearly double the number of rooms to 75, add a fresh coat of brick-red paint to the facade, and install wireless Internet access. Eager to recoup its investment, management—in the days before the opening ceremony on Aug. 8—started charging room rates of $262 a night, a sixfold increase over the old rates. Even with such big price increases, management figured they could fill at least 70% of their rooms with tourists during the Games.

They were wrong. "We are not getting as many guests during this Olympic period as everyone expected," says Mary Ma, sales and marketing department manager of the Red Hotel Beijing. "Maybe it is because more hotels have opened; maybe it's because hotels have greatly increased their room rates." The hotel has since cut average room rates to $130. That's still triple the normal rate. And the change may be too little, too late. With the Games under way, the Red Hotel's occupancy rate is still an anemic 50%.