THE Chinese property and travel tycoon Deng Hong likes to leave his personal stamp on his ventures.

Take his new InterContinental hotel in Chengdu, in the heart of China’s Sichuan province. Deng’s watercolours, the results of an earlier artistic career, adorn the walls. He designed the old-style teahouse on the hotel’s fifth floor, where guests can sip jasmine tea and savour dim sum. And parked outside the front entrance are a Lamborghini, a Bentley, a Maybach and a Rolls-Royce – from his personal collection of luxury cars.

Ten days ago, amid indoor fireworks and displays by dancing girls, hundreds of guests tucked into catfish stew, double-boiled shark’s fin and other local specialities at a 12-course banquet to mark the opening of the 560-room hotel, part of a huge new leisure and residential development.

The appetite for new hotels in China is in keeping with the country’s rapid economic development and urbanisation. IHG, the British company behind InterContinental and Holiday Inn, expects to open a new hotel there every week this year, for example, and the country has become a key battleground for all its main rivals.

The expansion is not confined to the main urban hubs of Shanghai and Beijing, but is also happening in second-tier cities, such as Chengdu.

Deng, who controls and chairs the ChengduExhibition & Travel Group (CET), is laying the groundwork for what he expects to be a big influx of overseas visitors to a city that boasts a population of 10m.

“I am confident that a lot of international visitors will come to Chengdu,” he said. “If they aren’t here today, they will be here tomorrow or the day after. Hotel development is a strong, long-term investment.”

CET is building two Holiday Inns and a Crowne Plaza close by, flats to house 50,000 people are awaiting their new residents and, at the gala dinner, Deng promised guests that he would build an opera house and museum.

In all, about 10,000 star-rated hotels are expected to be built in the country by 2015, according to the China National Tourism Administration. It said that the number of five-star properties is likely to rise to 500 from about 360 today.

The growth is being fuelled by a huge investment in transport infrastructure that will lead to the government building 97 new airports in the next 12 years.

IHG, which also owns the Crowne Plaza chain, has more hotels in China than any other overseas operator, and continues to lead the growth charge.

The region is already the company’s third-biggest market by number of hotels, behind America and Britain; but it will quickly move up the pecking order. Andrew Cosslett, IHG’s chief executive, who was in Chengdu for the gala opening, said: “China will be our second-biggest market within three or four years. It took us 23 years to get to 81 hotels there. We’ll open 50 this year.”

Critics argue that this is expansion for its own sake. They claim IHG is planting flags to build a network across the region but that many of its new hotels will be loss-leaders.

This is denied by Cosslett, who said: “China provides a significant revenue stream for IHG. The business model is focused on management contracts. We do not have to invest our capital in developing and building the hotels themselves; this is done by our third-party owners, so we make money from day one when we open a hotel in the country.”

IHG is not alone in harbouring big expansion plans for the country. Starwood, owner of brands that include Sheraton, Westin and Le Meridien, plans to open 29 hotels over the next two years, while Hilton is aiming to open 33 sites, including 25 of its Hilton Garden Inn brand.

In almost every case, the western chains are in the business of operating hotels in China rather than owning them. Management contracts involve supplying a hotel with a general manager and, in some cases, other senior personnel such as somebody to run the front desk. The operating company will take a percentage of the hotel’s total revenue and a cut of the profits.

In exchange, the site’s owner benefits from having a well-known brand above the door and from being part of the chain’s “system” – the central-reservations service, the loyalty scheme, and so on.

The game, then, for operators is to secure as wide a distribution for their brand as possible, to create scale.

IHG’s success in establishing such a foothold in China was aided in no small part by being the first western chain to have a presence in the country. The Holiday Inn Beijing Lido opened in 1984, so many Chinese became familiar with the brand and the way the company behind it operated. “It gave us a good platform,” said Edmond Ip, chief operating officer for IHG in China.

He argues that later, when the market began to open up and Chinese government officials encouraged domestic property developers to build hotels, landowners were often encouraged to talk to IHG.

More recently, many other international chains have entered the market. Accor, the French group behind Ibis and Sofitel, has the biggest presence after IHG, and is followed by several American players, including Starwood, Marriott, Hyatt and Hilton.

The competition among them is tough. “If it’s a prominent project, there is a lot of competition to get the site,” said Stephen Ho, senior vice-president for acquisitions and development in Asia for Starwood.

One of the biggest problems for western operators is not securing the locations, but finding the staff to work in completed hotels. The general manager at one branded hotel described the situation as “war”, and said demand had taken its toll on costs, with wage inflation on the rise. One hotelier suggested pay rates could climb 6% or 7% this year.

Operators are having to go to ever greater extremes to attract staff. IHG and Hilton have both aligned themselves with local universities to produce bespoke, hospitality-related courses to ensure they get a crop of suitable talent.

Both companies think this is a policy that will yield great rewards in the longer term. As the number of Chinese travelling internationally increases, the big hotel chains recognise they will need Mandarin speakers and Chinese staff at their properties around the world to cater for this market.

In the meantime, most of the western operators find they are having to tweak their brands to make them more acceptable to the local market.

Some of the differences are minor. Holiday Inn Express hotels in China have ditched the cinnamon rolls American guests might be accustomed to eating for breakfast in favour of “congee”, a Chinese porridge-like dish. Crowne Plaza offers a “pillow menu” with a bewildering array of stuffings – wheat cereal, lavender and chrysanthemum are among those on offer – to help guests sleep.

Chinese hotels also offer far more private-dining space than would be normal in their western counterparts, often replete with mahjong tables and other amenities.

James Dai, director of the Shanghai Wai Gao Qiao Keep-grand Hotel Co, owner of a number of hotels in China, said it was vital for international groups to have a “combined western and eastern culture” if they are to succeed.

It is a formula that is already proving successful, and with franchising about to take off in the hotel sector, foreign executives such as Cosslett, who visits the country three or four times a year, will have to get used to many more lavish opening parties.

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