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It's common knowledge that China”s economy is booming, with tourism, industry, real estate and transport growing at an unprecedented rate and the country set to host 2008”s Summer Olympics in Beijing and the 2010 World Expo in Shanghai.
China is the new Japan, as Shanghai's Pudong Shangri-La general manager, John Rice, explained: ”There are certain markets where if you want to operate a global company, you need to have an office. For Western companies that used to be Japan, but increasingly organisations are coming into China, which has the potential to become the biggest economy in the world.”
Such an influx of wealth and foreign visitors to China”s major cities naturally brings a need for more accommodation, both temporary and permanent. Every major international player cites Asia and the Middle East as their main targets for future growth, although China in particular is of key importance with InterContinental, Carlson, Hilton, Starwood, Marriott and Hyatt all bulldozing their way through at maniacal speed.
The current giant in the country is IHG, with 59 hotels already open and plans for a staggering 125 by the end of next year. Marriott also has grand plans, with 34 currently operating and a further 19 in the pipeline, while Hilton wants to add 300 to its current portfolio of 51 hotels in the next ten years, across the Hilton Family of Hotels brands.
The race is certainly on for the international groups to get hotels open in time for next summer in Beijing and construction in this country is a far cry from the majority of new-build real estate developments in the UK. With work continuing through the night and often without protective perimeters to keep the public at a safe distance, there aren”t many cigarette breaks, lunch hours or end-of-day beers for these guys.
Herein lies one of the pulls of developing in China: building cheap. And another, equally tantalising draw is that, for the time being, land is relatively inexpensive and up for sale, which means you can build big, too.
As Marriott International president and managing director international lodging, Ed Fuller said: ”The majority [of future developments] are in the Middle East and Asia. Europe is a high priority, but it”s easier to develop projects in cities where land is more readily available.
”We won”t put them in secondary or tertiary locations, we want to be in the heart of the city and that”s easier in Asia and the Middle East.”
Fuller”s sentiments reflect the impetus behind many of the big names from the US and Europe that want to open in cities where tourists are likely to flock, although some hotel companies based in the region are taking a different approach.
Shangri-La chief marketing officer, Martin Waechter, told ABTN: ”The Chinese market is exploding and whilst the majority of Western companies entering the market have a key city focus ” in Shanghai and Beijing ” Shangri-La is branching out from these cities, where we already have a well-established presence, and opening in what are often, wrongly termed ”secondary cities”.”
Indeed, for companies like Shangri-La, it”s the native population, rather than the tourists, that are the main focus. ”Shangri-La is doubling its portfolio in China due to the increase in travel activity throughout the country,” Waechter said.
”What many people don”t realise about our company is that our most important sector is domestic business travel ” there were over 950m travel activities last year alone.”
That”s not to say that the Western giants are ignorant of the need to provide for domestic travellers, with developments emerging in cities such as Kunshan, Fochan, Wuhan and Xiamen ” albeit they are, understandably, behind the established Asian Pacific hotel groups for whom China has always been a focus.
Aside from location, Shangri-La is also keen to stress the importance of ownership: ”Unlike many of the big Western companies entering the country under management or franchise agreements, Shangri-La both owns and operates our hotels,” said Waechter. ”If it”s got Shangri-La on the building, you”re certain to get Shangri-La inside the building.”
Setting aside the degree of pride in ownership that comes with any private hotel chain versus its ever-expanding, franchise-run cousins, the point made by Waechter highlights an important issue: the big giants are plastering their name around the country with contracts that by their very nature give them less control over operations.
This isn”t necessarily a problem, after all these companies would hardly be enjoying the success they are now if franchise and management agreements didn”t work. Hilton and IHG, for example, openly admit that they are selling off their owned properties in order to focus on the management and franchise side of the business.
But alongside the rapid rate of construction and sheer number of these properties in China, it appears to be a case of quantity rather than quality. Having said that, international tourism figures for Asia matched those in America for the first time last year, which perhaps suggests there is no alternative but to get them built as quickly as possible. Only occupancy rates when they”re all up and running will tell if the gusto was worth it.