A handful of foreign entrepreneurs have gone into rural China to operate boutique hotels in restored properties with historic or vintage appeal

August 13, 2013

From Outsiders to Innkeepers in China’s Sleepy Countryside



Brian Linden and his wife, Jeanee, converted a courtyard residential complex in Yunnan Province, built before the Communist revolution, into the Linden Centre hotel.

XIZHOU, China — Brian Linden welcomed the guests to his boutique hotel in one of its courtyards at the end of a cobblestone alley here, surrounded by old stone walls and polished wood balconies. He invited the group, from Greenwich, Conn., to peruse the hotel’s book collection, which he created years ago as a doctoral candidate in Sinology at Stanford University. “And if any of you are light sleepers, what I recommend is, turn on the fan for some white noise,” Mr. Linden said. “Because there’s no white noise here at all.”

The hotel is far from the noise of any major city, which Mr. Linden, an American who first arrived in China in 1984 as a student, thinks is one of its draws. He and his wife, Jeanee, are among a small number of foreign entrepreneurs in rural China who operate boutique hotels in restored properties that have historic charm. They converted a courtyard residential complex in Yunnan Province, built before the Communist revolution, into the Linden Centre.More hotel rooms are being built in China than anywhere else in the world, according to data compiled by STR Global, a market forecaster. At the top end, luxury brands like Aman Resorts and Four Seasons Hotels and Resorts are racing to open new hotels in the country. For some rooms, they are charging China’s emerging superrich the equivalent of more than a thousand dollars a night.

Mr. Linden and other foreign owners of smaller boutique hotels say they would rather offer tourists more distinctive lodging. Like Japan’s ryokans, Italy’s villas and America’s Victorian bed-and-breakfasts, China’s boutique retreats could lure travelers with their link to the past, especially since they have been replaced in major cities by modern buildings.

In China’s upscale hotel market, “nobody’s taking the lead to do anything sustainably; all they’re doing is just tapping into a flow of tourists,” Mr. Linden said. “Some people have to come in here and really show China that there are other models, and those people have to be fairly altruistic because when we started, this wasn’t a very lucrative type of project.”

Guests at the smaller independent hotels like Mr. Linden’s include a smattering of wealthy Chinese seeking escape from the bustle of big cities, but the vast majority are foreigners.

Mr. Linden’s hotel is comfortable, but he offers few frills. He said that most Chinese who can afford to stay — nightly rates range from 900 to 1,200 renminbi, or about $145 to $195 — typically prefer more luxurious accommodations that include television sets and air-conditioning. The Linden Centre is a 25-minute taxi ride from Dali, a popular Yunnan destination, and a morning’s drive from Lijiang, a city of 1.2 million that is one of China’s largest magnets for domestic tourists.

Chris Barclay, whose riverside boutique hotel in Guangxi Province features a restored mud-brick barn, said that many of his Chinese guests booked for three nights. But they often leave after the first, out of frustration with the lack of amenities. Local officials are intrigued by his project, Mr. Barclay said, but are amazed that any hotelier would market such humble lodgings to upscale travelers.

For the officials, it would be like “building a hotel out of ice in Lapland,” Mr. Barclay said with a laugh. “They’re still trying to process it.”

But Huang Yinwu, an architect in Yunnan who for several years led a historical restoration in the Shaxi Valley financed by the Swiss government, said many of the urban Chinese he has met, whether backpackers or high-end travelers, are increasingly open to rustic getaways.

For now, a handful of foreign hotel operators appear to dominate China’s market for boutique retreats. They acknowledge that their work can be challenging.

It took the Lindens three years to restore their courtyard complex, in part because it is protected by the same national heritage regulations that apply to the Great Wall. The restoration was complicated by jurisdictional battles among local, provincial and national heritage officials, Mr. Linden said.

Mr. Barclay had to negotiate with a village council that opposed his plan to install toilets in his Yunnan Province inn, which was built during the Qing dynasty. (He ended up renovating some nearby public toilets.) It also has taken several years to train his Chinese staff to cater to foreign guests, he said.

And because foreigners are not allowed to own land, those who manage boutique hotels under lease agreements are at the mercy of the local authorities.

“Legally, it’s a big mess,” said Julien Minet, a French ethnologist who operates a small bed-and-breakfast inn in a quiet village in Anhui Province. “Maybe one day I will lose everything, and I’m prepared for this.”

As for marketing, the hoteliers say they depend on word of mouth and their Web sites to attract guests, mainly foreigners. Mr. Barclay and Mr. Linden lecture about their work when they travel. And the Lindens have high school exchange programs and allow international scholars to stay free in exchange for giving talks, practices Mr. Linden said helped raise his hotel’s profile.

Although the number of Chinese guests is slowly increasing, the entrepreneurs say they are not in a hurry to advertise in the mainland market. The boutique hoteliers are all doing well enough by catering to mainly foreign clientele. Mr. Linden said the occupancy rate at the 16-room hotel is now 65 percent to 70 percent. A sister hotel in Xizhou is tentatively scheduled to open next year, and the Lindens are pursuing other projects across Yunnan Province, including one on a tea plantation near the China-Myanmar border.

The Lindens’ hotel is far from an authentic representation of China, said Ian Rowen, a geography doctoral candidate at the University of Colorado. However, he said, the Lindens have created a novel and tasteful way to introduce international tourists to Chinese and some ethnic-minority traditions.

“It’s a good example of the way that heritage tourism can proceed,” said Mr. Rowen, who has worked in China’s tourism industry and conducted academic research at the Lindens’ hotel.

The Lindens, who also own an art gallery a few hours north of Chicago, discovered their Yunnan property in 2005 while traveling across China in search of a place to begin their dream project.

They signed a 20-year lease in 2007. Part of the draw was that the complex, which covers about 3,700 square meters, or nearly 40,000 square feet, had escaped destruction during the Cultural Revolution of the 1960s. But it badly needed a face-lift.

For the next three years, the couple poured about $600,000 of their savings into a restoration.

“We never were building equity in the buildings, because we don’t own them,” Mr. Linden said. “Our equity in the future is really just our brand. And that’s tied so much to Jeanee’s and my story.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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