High-end hotels are being hit by a double whammy: The economic downturn and the H1N1 flu outbreak.

In extreme cases, occupancy levels have fallen to just 3 percent of capacity, according to anecdotal evidence.

In addition, wages are being slashed, staff are being laid off, the number of interns hired is increasing, employees are being told to move back into on-site accommodation and generous expatriate contracts are not being renewed.

"It's slash and burn," said an expat chef at one five-star hotel in Beijing, who was recently asked to resign or face being sacked.

"During the Olympics, rooms were going for 6,000-7000 yuan a night. Now they are going for 550 yuan," said the chef, who did not want to be named.

According to recently-released figures from the Beijing Bureau of Statistics, the average occupancy rate at the city's star-rated hotels was 44.5 percent during the first quarter, down 10.1 percentage points from a year ago.

"We received a double blow," said Gao Lin, a public relations manager at Holiday Inn Lido Beijing, a four-star hotel located within a commercial complex that accommodates a large number of Beijing's expat community and multinational companies.

Earlier in the year, business people stopped coming, Gao said. Then, in May, when the first H1N1 flu case was detected in Beijing, the number of tourists began to fall.

May and June are the peak period for hotels, Gao said, but the occupancy rate wa 50 percent, compared with 90 percent during the same period in the previous two years.

"Most hotels, especially those catering to international guests, have begun cutting their advertisement budgets," said a manager from a local advertisement agency who declined to be named.

Reports suggest the hotel industry in Shanghai is doing better than Beijing, with a slightly higher occupancy and average room rate.

Meanwhile, economy hotels in the vicinity of luxury hotels are becoming more popular.

Adapting to the harsher economic climate was the focus of the third Asia Luxury Travel Market show in Shanghai earlier this month. "I think luxury hotels should be very careful not to slash the price too much. Instead of cutting the price 40 or 50 percent, they should add more value," said Roland Jegge, vice president (Asia-Pacific) of Worldhotels, when talking about his company's strategy.

Yvonne Yan, spokesperson for Hilton Shanghai, agreed.

Besides offering free transportation from airport and fruit in rooms, Hilton also heavily promotes its food and beverages, special packages and service upgrading, Yan said.

"By doing so, we remained attractive to guests and saw a positive growth in occupancy," she said.

In Beijing, the star hotels are making preparations for guests to check their temperatures as a precaution against the spread of the H1N1 flu. Some hotels are also phoning guests in advance to advise them to take their temperature before traveling.

"We are watching the flu situation closely," said Artemis Wang, marketing communications manager at Regal International East Asia Hotel in Shanghai.

Some five-star hotels are focusing on domestic travelers.

"We designed an Asian-style buffet dinner, with some deep-fried Western food, which caters to Asians' taste," said Emily Wang, a PR manager from the Regent Beijing.

"The hotel also promotes wedding banquets for locals."

However, with revenue per room falling almost 30 percent during the first quarter of 2009, the impact of the global economic crisis continues to take its toll on hotels across the Asia-Pacific, according to analysis by management consultants Deloitte.

(China Daily June 29, 2009)