Location Strategies of Multinational Hotel Groups in China: An Application of Game Theory

Abstract

Location is an important issue for multinational hotel groups (MHGs) as it influences the competitive advantages and even survival of hotel corporations. The first aim of this thesis is critically review existing literature related to MHGs regarding the current situation in China and their decision-making process for hotel location choice. Then, it aims to develop in-depth insights into key factors influencing the location strategies of MHGs in mainland China. In addition, it also attempts to develop regression models to reflect the decision-making process and each role of stakeholders. It has seven specific research objectives, including (1) reviewing literature relating to MHGs and its explanation, (2) summarising the characteristics of the Chinese hospitality and current situation of MHGs in China, (3) addressing the functions of game theory and its applications in industry, (4) exploring roles and influences of different stakeholders during the MHGs expansion in China, (5) synthesising the stakeholder’s views and establishing inter-relationships among the stakeholders, (6) evaluating factors that influencing the locational decision-making process, (7) examining validity and reliability of the decision-making models. In order to achieve the research aims and objectives, with the development of the conceptual framework, a mixed research method was employed in this study which included two steps interviewing and secondary data analysis. 15 interviews were made for collecting the opinions of industrialists and the results of the interviews gave the direction of research regarding the determining factors for MHGs’ location strategies formulation. Secondary data was collected from Chinese national bureaucratic statistics and local government official data websites including 9 cities ranging from 1999 to 2018. Three regression models were built for representing the relevant stakeholders’ interests. The findings of this study shed new light on the decision-making process in the hotel industry indicating that three participants namely MHGs, government and land developers are involved in such locational strategies formulation. This study contributes to existing knowledge of hotel group locational decision-making process in the context of China by providing a new perspective of using game theory, which underlies the interests of three participants and signifies the conflicts between them. The location strategies of MHGs are taken by the negotiation between these three players. It is theoretically proposed by the government for the land-using plan. Followed by the influence of the policy made by the local government, land developers and hoteliers engage in the decision-making process. It is formed by a mutual and restricted relationship between these three players while hoteliers and land developers become allies to some extent in order to meet the requirements raised by the government. All three stakeholders pay attention to influential factors such as market size, labour price and tourism resources. However, from the perspective of land developers, the convenience of public transport has no significant influence on the investment decision. In addition, it should be noted that tourism resources have a negative impact on the investment of real estate. As for the hoteliers, influential factors such as infrastructure construction and cultural distance also play an essential role in the locational strategy decision-making process. Additionally, the role of government and land developers have been emphasized in the hotelier model, which both have a significant influence on the number of multinational hotel properties. Based on these findings, both theoretical and practical implications were derived. Expressly, practical recommendations have also been provided, offering efficient guidance to those who want to successfully enter the mainland Chinese hotel market.