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The differences among strat- egies and decisions usually lead to different directions of the war. When Star Wood, Marriott, Peninsular and other high-end hotels are hurrying up in their expansion in China, international hotel operators represented by InterContinental and Accor already launched the localized brands in China.
In comparison, local high-end brands in China cannot endure being surpassed by foreign competitors. They make use of their advantages in capital to develop chain hotels in foreign markets.
As the famous U.S. general Omar Bradley said, “in war there is no second prize for the runner-up”. Five years ago, international hotel groups just began to show interest in the Chinese market and take a few measures for the access. Now, they began to battle against each other and Chinese counterparts in the battlefield filled with furious competition.
It is different from 5 or 10 years ago. The service suppliers, who previously took the stronger place in the negotiation with property owners – it was a common case that the hotel opera- tors chose the property owners – now are deprived of their advantages in the negotiation table. The turn of roles shows that the competition among high-end hotels in China has been already completely heated up. Behind the role change is a series of unpredictable questions, such as the contending for talents, the lowered standard of prop- erty selection and occupancy rate of high-end hotels.
Increasing Demand in China
“In the past five years, the luxury tourism in China has never been rid of the increasing trend. The two big events in China – Olympic Games and World Expo – kept pushing the devel- opment of high-end hotel industry,”said Joseph W.Y. Chong, general manager of Shanghai Peninsula Hotel.
In fact, the foreign hotels never eased their efforts in taking the Chinese market when the Expo was ended. Instead, some well-established brands like Starwood and Marriott still showed a great intention to expand themselves in this country.
Starwood Group, which owns the brands of Stregis, Sheraton and Westin, plans to double the number of its hotels in China to 100 by the end of 2012. By then China will replace the United States as the largest overseas market of this Group. Marriott Group plans to establish 130 new hotels in the markets outside North America and half of them are to be established in China, India and the UAE. “The 2012 plan in China aims at keeping the current fast expansion rate. In my opinion, 23 new hotels that were opened or will be opened this year are mainly located in the second- and third-tier cities of China,” said Frits van Paasschen, presi- dent and CEO of Starwood Hotels & Resorts International Group. Even the latecomer are hurrying up to catch up with the frontrunners. After establishing the first hotel in Sanya, Hainan, MGM Resorts International is ready to open more hotels in a more diversified list of places in China.
“By now five projects are confirmed to be built. They are respectively located in Beijing, Tianjin, Chongqing, Hangzhou and Chengdu. The earliest one to be completed is the Diaoyutai MGM hotel that will be opened in May 2013 in Beijing. In addition, we have about ten projects under negotiation, including the one in Shanghai –we attach great importance to the overall development in the whole country,”said Fan Dawei, vice president of Sales and Marketing at the MGM Resorts International.
Even Orient Express Hotel Ltd, which is now having no hotel in mainland China, is going to have a high-profile entry into this country. “We are now looking for business opportunities in the hotel market in Shanghai and other places of China. It is still unknown how many hotels we will run in China when this year comes to its end. We are still discussing about it and the number and locations are confidential. As for the location of our first hotel in China, we are not yet sure about this. From the opportunity seeking to discussion, then to the agreement conclusion and finally to the finalization of longterm contract, the results are usually beyond our expectation,” said Filip Boyen, operating president of Orient Express.
A War for Dominance with Foreign Hotels
In the past 15 years, the Chinese high-end hotels witnessed increasing investment. From 1999 to 2007, the investment amount into Chinese hotel industry increased by 36% yearly from 7.846 billion yuan to 92.507 billion yuan. From 2000 to 2008, the annual growth rate of the investment into five-star hotels is as high as 361%. The number of five-star hotels in China is expected to exceed 1000 by 2015.
The analysts put forward the features of this crazy expansion:
I: Embedded Chinese elements
Behind the drastic increase is the intensified horizontal competition. In order to maximally expand the local market share in China, hotel brands adopt various intelligent and maneuvered measures. Some of them are to win the favor by taking the best location in a place; some of them increase the presence of Chinese elements in the design of buildings and some of them even launched local brands.
In the operating culture of Peninsula Hotel, the geographical location is always the first concern. The Shanghai Peninsular Hotel that was opened in 2009 is located in the Bond, land-arking area of Shanghai. Guests can watch the beautiful scenes of the banks of Huangpu River at the top of the hotel. The Beijing Wangfujing Peninsular Hotel is located in the prosperous Wangfujing Commercial Area and is only several minutes of walk from the famous shopping and cuisine area in Beijing. “The definition about high-end hotels is never changed in these years. Customers are inclined to look for irreplaceable experiences, unique and real services, and authentic local travel experiences. At times, guests care about not only the quality of the hotel and its products but also the easy availability of the hotel which can save their time,”said Rainy Chan, general manager of Hong Kong Peninsula Hotel. Starwood, however, wants to keep the consistency of its brand experience. Their trump to success is to add more Chinese elements to cater for this market. “We usually use local pictures in the hotels we open in China, like the traditional lotus-shaped pat- terns. We do this because we believe that people do not want to see familiar patterns in another country after hours’ flight. In addition, the halls in the Chinese hotels are bigger, which contains both artistic and scientific consideration. We do not want to set up a uniformed standard for all of our hotels but we do not want to distinct hotels from each other vastly, which might undermine the consistency of our brand experience. How to reach the balance between uniformity and diversity is what we are searching for. After doing that, we want each hotel to have its own soul,” said Frits van Paasschen of Starwood.
InterContinental smartly launched a completely new brand: Hualuxe Hotels & Resorts, which is the first highend hotel brand exclusively made for Chinese consumers. Accor Group from France followed suit by upgrading its original brand Mercure to Grand Mercure that is full of “Chinese elements”. Actually, there is a certain number of international hotel groups having the same plan of “launching China-based brands and services” as well.
However, not all the foreign hotels have the same concept about China-oriented services or launching Chinese local brands. Orient Express Hotel Ltd has already expressed its reluctance to do this.
“We target those matured international leisure tourists and plan to create pure local experiences. We are not going to provide those travelers in Italy with Chinese dishes. Those international customers who are active in the high-end market have quite similar requirements for high-quality services and experiences of genuine local customs and climate no matter they are from China, North America, South America or Europe,” said Filip Boyen.
II: Localized Service
The high-level luxury and the high-standard local experiences should be achieved at the same time. This seems not to be a hard problem for those experienced international hotel groups. They are trying to turn hotels from a place of accommodation to a destination through standardization, individualization and quality-orientation of services.
The Hong Kong Peninsular Hotel, whose average room price is the highest among all hotels in Hong Kong, launched the “Peninsula School” and“Fashion Life School”. They invited the bakers, personal image designers and fengshui masters into the“school”, trying to provide the guests in the hotel with a close contact with the culture of Peninsula Hotel. In addition, they have their own helicopters, which can carry high-end guests directly from the hotel to the golf course within ten minutes. “The service culture of Peninsula can be summarized as that ‘we always provide more than you can image,” said Joseph W.Y. Chong, general manager of Shanghai Peninsula Hotel. “We attach more importance to making best of the value of everything.”
“Our operation focuses on local culture instead of proposing a uniformed standard. This is our own business pattern. For example, we have a hotel named Splendido in Porfofino, Italy. It carried on its original name which it owned before being recruited into our brand and remained unchanged for 20 years. In this hotel we also provide Gurria-style cooking, which is a characteristic part of the Italian food. We are not going to change that. Neither are we going to add Japanese, Chinese or other dishes into the menu,” said a senior executive from Orient Express Hotel Ltd.
In comparison, local high-end brands in China cannot endure being surpassed by foreign competitors. They make use of their advantages in capital to develop chain hotels in foreign markets.
As the famous U.S. general Omar Bradley said, “in war there is no second prize for the runner-up”. Five years ago, international hotel groups just began to show interest in the Chinese market and take a few measures for the access. Now, they began to battle against each other and Chinese counterparts in the battlefield filled with furious competition.
It is different from 5 or 10 years ago. The service suppliers, who previously took the stronger place in the negotiation with property owners – it was a common case that the hotel opera- tors chose the property owners – now are deprived of their advantages in the negotiation table. The turn of roles shows that the competition among high-end hotels in China has been already completely heated up. Behind the role change is a series of unpredictable questions, such as the contending for talents, the lowered standard of prop- erty selection and occupancy rate of high-end hotels.
Increasing Demand in China
“In the past five years, the luxury tourism in China has never been rid of the increasing trend. The two big events in China – Olympic Games and World Expo – kept pushing the devel- opment of high-end hotel industry,”said Joseph W.Y. Chong, general manager of Shanghai Peninsula Hotel.
In fact, the foreign hotels never eased their efforts in taking the Chinese market when the Expo was ended. Instead, some well-established brands like Starwood and Marriott still showed a great intention to expand themselves in this country.
Starwood Group, which owns the brands of Stregis, Sheraton and Westin, plans to double the number of its hotels in China to 100 by the end of 2012. By then China will replace the United States as the largest overseas market of this Group. Marriott Group plans to establish 130 new hotels in the markets outside North America and half of them are to be established in China, India and the UAE. “The 2012 plan in China aims at keeping the current fast expansion rate. In my opinion, 23 new hotels that were opened or will be opened this year are mainly located in the second- and third-tier cities of China,” said Frits van Paasschen, presi- dent and CEO of Starwood Hotels & Resorts International Group. Even the latecomer are hurrying up to catch up with the frontrunners. After establishing the first hotel in Sanya, Hainan, MGM Resorts International is ready to open more hotels in a more diversified list of places in China.
“By now five projects are confirmed to be built. They are respectively located in Beijing, Tianjin, Chongqing, Hangzhou and Chengdu. The earliest one to be completed is the Diaoyutai MGM hotel that will be opened in May 2013 in Beijing. In addition, we have about ten projects under negotiation, including the one in Shanghai –we attach great importance to the overall development in the whole country,”said Fan Dawei, vice president of Sales and Marketing at the MGM Resorts International.
Even Orient Express Hotel Ltd, which is now having no hotel in mainland China, is going to have a high-profile entry into this country. “We are now looking for business opportunities in the hotel market in Shanghai and other places of China. It is still unknown how many hotels we will run in China when this year comes to its end. We are still discussing about it and the number and locations are confidential. As for the location of our first hotel in China, we are not yet sure about this. From the opportunity seeking to discussion, then to the agreement conclusion and finally to the finalization of longterm contract, the results are usually beyond our expectation,” said Filip Boyen, operating president of Orient Express.
A War for Dominance with Foreign Hotels
In the past 15 years, the Chinese high-end hotels witnessed increasing investment. From 1999 to 2007, the investment amount into Chinese hotel industry increased by 36% yearly from 7.846 billion yuan to 92.507 billion yuan. From 2000 to 2008, the annual growth rate of the investment into five-star hotels is as high as 361%. The number of five-star hotels in China is expected to exceed 1000 by 2015.
The analysts put forward the features of this crazy expansion:
I: Embedded Chinese elements
Behind the drastic increase is the intensified horizontal competition. In order to maximally expand the local market share in China, hotel brands adopt various intelligent and maneuvered measures. Some of them are to win the favor by taking the best location in a place; some of them increase the presence of Chinese elements in the design of buildings and some of them even launched local brands.
In the operating culture of Peninsula Hotel, the geographical location is always the first concern. The Shanghai Peninsular Hotel that was opened in 2009 is located in the Bond, land-arking area of Shanghai. Guests can watch the beautiful scenes of the banks of Huangpu River at the top of the hotel. The Beijing Wangfujing Peninsular Hotel is located in the prosperous Wangfujing Commercial Area and is only several minutes of walk from the famous shopping and cuisine area in Beijing. “The definition about high-end hotels is never changed in these years. Customers are inclined to look for irreplaceable experiences, unique and real services, and authentic local travel experiences. At times, guests care about not only the quality of the hotel and its products but also the easy availability of the hotel which can save their time,”said Rainy Chan, general manager of Hong Kong Peninsula Hotel. Starwood, however, wants to keep the consistency of its brand experience. Their trump to success is to add more Chinese elements to cater for this market. “We usually use local pictures in the hotels we open in China, like the traditional lotus-shaped pat- terns. We do this because we believe that people do not want to see familiar patterns in another country after hours’ flight. In addition, the halls in the Chinese hotels are bigger, which contains both artistic and scientific consideration. We do not want to set up a uniformed standard for all of our hotels but we do not want to distinct hotels from each other vastly, which might undermine the consistency of our brand experience. How to reach the balance between uniformity and diversity is what we are searching for. After doing that, we want each hotel to have its own soul,” said Frits van Paasschen of Starwood.
InterContinental smartly launched a completely new brand: Hualuxe Hotels & Resorts, which is the first highend hotel brand exclusively made for Chinese consumers. Accor Group from France followed suit by upgrading its original brand Mercure to Grand Mercure that is full of “Chinese elements”. Actually, there is a certain number of international hotel groups having the same plan of “launching China-based brands and services” as well.
However, not all the foreign hotels have the same concept about China-oriented services or launching Chinese local brands. Orient Express Hotel Ltd has already expressed its reluctance to do this.
“We target those matured international leisure tourists and plan to create pure local experiences. We are not going to provide those travelers in Italy with Chinese dishes. Those international customers who are active in the high-end market have quite similar requirements for high-quality services and experiences of genuine local customs and climate no matter they are from China, North America, South America or Europe,” said Filip Boyen.
II: Localized Service
The high-level luxury and the high-standard local experiences should be achieved at the same time. This seems not to be a hard problem for those experienced international hotel groups. They are trying to turn hotels from a place of accommodation to a destination through standardization, individualization and quality-orientation of services.
The Hong Kong Peninsular Hotel, whose average room price is the highest among all hotels in Hong Kong, launched the “Peninsula School” and“Fashion Life School”. They invited the bakers, personal image designers and fengshui masters into the“school”, trying to provide the guests in the hotel with a close contact with the culture of Peninsula Hotel. In addition, they have their own helicopters, which can carry high-end guests directly from the hotel to the golf course within ten minutes. “The service culture of Peninsula can be summarized as that ‘we always provide more than you can image,” said Joseph W.Y. Chong, general manager of Shanghai Peninsula Hotel. “We attach more importance to making best of the value of everything.”
“Our operation focuses on local culture instead of proposing a uniformed standard. This is our own business pattern. For example, we have a hotel named Splendido in Porfofino, Italy. It carried on its original name which it owned before being recruited into our brand and remained unchanged for 20 years. In this hotel we also provide Gurria-style cooking, which is a characteristic part of the Italian food. We are not going to change that. Neither are we going to add Japanese, Chinese or other dishes into the menu,” said a senior executive from Orient Express Hotel Ltd.