The mainland's first five-star foreign-owned hotel, the White Swan Hotel in Guangzhou, is to overhaul its business model to pave the way for a listing, according to a senior official.

Opened in 1983 the hotel has become a key asset of the newly established White Swan Group, which will expand into hotel management, budget hotels, property development and car rental services, general manager Huang Yingcong said yesterday.

The state-owned hotel was forced to transform as a growing number of overseas rivals opened in the city.

'During the next two to three years, we seek to transform White Swan Hotel into a flagship of the group and a model of mixed-use development,' he said. 'We will also actively pursue a listing and increase our international competitiveness.'

White Swan has witnessed much of China's 30 years of reform.

Gao Siren, the director of the central government's liaison office in Hong Kong, recently praised it for opening the mainland's eyes to 'what it means by a five-star hotel, what it means by design and what it means by services'.

Despite its popularity with state heads such as late paramount leader Deng Xiaoping, Queen Elizabeth II and North Korean leader Kim Jong-il, the White Swan must compete with a growing number of overseas brands such as Shangri-La, Westin, Grand Hyatt, Ritz-Carlton, Four Seasons and Mandarin Oriental.

'Competition will intensify for domestically managed hotels,' said Lily Ng, the senior vice-president of corporate advisory at Jones Lang LaSalle Hotels.

'Maintaining a healthy level of competition is good for the market and consumer.'

She said Guangzhou's development into a service-based city and a convention and exhibition hub would spur demand for higher-end tourist accommodation.

The opening of the Shangri-La and Westin hotels helped lift the average room rate by 16.4 per cent to 891 yuan per room, but dragged down occupancy by 10 percentage points to 57.5 per cent last year, the hotel consultant's statistics showed.

'New hotel supply typically takes two to three years to be fully absorbed, so a surge of supply within a short period of time can create temporary pressure on overall hotel performance,' Ms Ng said.

White Swan is on Shamian Island, which will be turned into a retail, hotel and entertainment precinct.

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