The new Tokyo: Shanghai

My first day in Shanghai was pretty amazing. We arrived at Shanghai after a 2 hour plane ride and was whisked off to the hotel where my dad had a meeting and I got an in depth tour of the hotel from the hotel manager. I got to meet the director of HR, Sales, Reservations, Housekeeping, Guest Services, F&B, and got to see how security and the kitchen staff was run.

Some interesting things about the hotel:

• The hotel employs about 800 people and they each of their own uniforms, locker, and are provided 2 meals a day
• Each hotel designs their own uniforms, since the owners differ and they want to be unique. This seems rather inefficient, although it is mostly a one time cost
• The industry attrition rate is in Shanghai hotels is about 40% and staffing is the biggest issue for hotels. The hotel has been able to lower it by sponsoring various training programs and growth opportunities, but that in itself brings issues as this makes the staff even more valuable if they want to do something else
• Employees are not given an ownership stake until they reach the GM level, which is surprising as this would be a good way to lower attrition
• The margins on hotel rooms are about 80% since the primary costs are housekeeping, electricity, and service. This dwarfs the margin from restaurants which is about 35%, and so some hotels are now just not having restaurants at all. They don't actually have an estimate of how much incremental revenue from services and F&B a guest brings in though, which is a little surprising
• 70% of the patrons of the hotel restaurants are local - in other words only 30% of hotel guests actually dine at the hotel, further bolstering the argument for not having restaurants
• The spa business also has high margins, although this spa actually brings masseuses from Thailand to work here and pays for their living expenses
• Shanghai is very much a commercial center, with 90% occupancy during the week, and only about 60% occupancy on weekends
• Accounting requirements in China are pretty ridiculous - most documents need to not only be printed, but stored indefinitely/permanently
• Each hotel is pretty much it's own business, with revenues exceeding $15M a year, the owner acting as the board of directors, and the GM acting as the CEO
• All renovations to the hotel have to be approved by the owner, as well as any expenditures over 2000RMB ($225)\nAll rates are negotiable
• Although there are 6 (and soon 9) hotels from the same chain in Shanghai, they all compete since the owners are all different. This brings up interesting conflict of interest issues, although to some extent, the chain would want to maximize profits for each individual property

Some interesting things about Shanghai:

• 20 years ago, there were no international hotels in Shanghai, and the hotels were crummy and insect ridden. 10 years ago, PuDong area was farmland and undeveloped. Today, PuDong is like the financial district, and 2 of the tallest buildings in the world are there, and you don't see any farms at all
• There's a bunch of European style (gothic) buildings recently restored left over from the colonial days, which adds to the craziness
  
• There are 22M people in greater Shanghai, which is equivalent to the population of Taiwan...
• Shanghai feels very much like Tokyo - a mix of the super new with the super old
  

  From Shanghai 2007

  From Shanghai 2007

• Traffic lights are only guidelines - people ignore them when they want

My appointed tour guides Rachel and Matthew. They got to have a half day at work in return for taking me around Shanghai for the day. They're a ton of fun and were kind enough to take me to get some awesome food and see some cool sites.

From Shanghai 2007

Oh and welcome to the year of the pig Shanghai style

From Shanghai 2007

And talk about your bad ass soup dumplings - so much soup you have to use a straw. Awww yeah.

From Shanghai 2007

And Chinese people like gold so much, they build a fake gold tree and throw money on it

From Shanghai 2007

Finally, here's the Mckinsey office in Shanghai. You can't see it here but there's a pretty big logo at the top and they have like 5 floors. The office is in XinTianDi, the expat bar/club district. Sweet.

From Shanghai 2007