Barceló Hotels & Resorts and Plateno Hotel Group are working together to expand the Spanish brand in Asia.
GLOBAL REPORT – After months of negotiations, Spain’s Barceló Hotels & Resorts has inked an agreement with Chinese giant Plateno Hotels Group in a master franchise deal to establish 100 upscale properties over the next decade across China and in other Asia/Pacific markets.
According to the terms, Plateno will manage a mix of urban and resort hotels under the Barceló brand, giving the Spanish company valuable exposure and experience in one of the world’s largest travel markets while providing the operator with Western expertise, executives said.
“With this agreement, the groups will be able to combine European know-how with knowledge of the Chinese markets,” said Raúl González, Barceló CEO for EMEA.
In his comments at the signing, Plateno CEO Alex Zhang said the partnership was “a great honor and a great responsibility to establish a brand with so much history like Barceló in China, where European customs and traditions are becoming more valued.”
Barceló follows in the footsteps of fellow major Spanish chains Meliá Hotels International and NH Hotels, which have partnerships with Chinese hotel groups Jin Jiang International Hotels and HNA Group, respectively, although the NH-HNA marriage is under pressure from activist investors.
The agreement also comes three months after Plateno, with 3,000 hotels of 450,000 rooms in some 300 destinations, opened its midscale Hampton by Hilton flagship property in Guangzhou as part of a deal with Hilton involving 400 hotels.
Barceló Corporate General Director Javier Abadía, who handled the negotiations that began in 2014, said the Spanish group met with nine other Chinese groups, but talks never progressed for various reasons.
“We liked Plateno because it has a presence in a very complex market, and it is one they know very well,” he said. “Also, we were attracted by the fact that the Plateno executives were educated in the United States and are thoroughly familiar with Western business practices, which was a welcome change from some of the other groups that were clearly not in the same league.”
Abadía said the first contracts are expected to be signed this year with initial openings in 2017 in major Chinese cities like Beijing, Guangzhou and Shanghai.
The principal focus will be on the four- and five-star urban segment and later the leisure and resort markets.
A lot to learn
Abadía said there will be an adjustment period to get properties up to expectations.
“There is going to be a lot to learn from both sides,” he said. “We’ve looked at some of their hotels, and while there was much to praise, there were also areas which need improving. We’ll exchange teams to observe each other’s operations.
“It’s obviously going to be a challenge, but they are fully conscious that this is going to be something new for them.”
Abadiá said he was not concerned at the recent hiccups in the Chinese economy, noting that it was still performing better than most in Europe with expected growth this year of 6% or 7%.
“And there is this huge middle class and young consumers who are traveling more and demanding more upscale accommodations which these hotels will provide,” he said. “They will now become familiar with the Barceló brand, which they will find in other countries.”
Vivian Wang, the Plateno executive managing the Barceló brand, said the Spanish company was a good fit because of its “tradition, experience and know-how as an experienced hotelier.”
“After international brands entered China almost 30 years ago, Chinese consumers are looking for more than just the standard choice in hotels. They want a special and authentic experience, (and) Barceló fits well into this trend,” she said.
Wang said Plateno will take added expertise from the partnership.
“And, of course, the cooperation with foreign brands will up our game,” she said.
Along with China, the agreement calls for Barceló-branded properties in Thailand, Malaysia, Indonesia, the Philippines and Australia.
“Other markets like Vietnam and Laos are growing fast and worth a look at,” she said.
Entering the unknown
Ivar Yuste, a founding partner of the Madrid-based hotel consultancy PHG Hotels & Resorts, said entering into a huge and unknown market like China’s could be tricky.
“The challenge lies precisely in the operation and logistics,” he argued. “It is very common practice to join forces with a strong local investor to at least be able to guarantee the best locations and assets, and that is what Melia and NH did.
“It is very different to take a franchise approach and let a Chinese partner operate your hotels and deliver your brand standards, which as far as we understand is the route Barceló intends to take.”
Yuste said the obvious appeal to the Spanish chains jumping into China was due to the vastness of the market and potential rewards further down the road.
“One wonders why Spanish chains are entering China and are not entering North America, which is a much easier market, and especially when most large Spanish hotel companies are already in the Caribbean and Latam,” Yuste said.
The answers are, he said, that China is the second-largest tourism generator in the world, Chinese tourism into Spain is growing steadily and Spain is eagerly trying to increase those numbers.
“Spreading your hotel brand in China is a way of contributing toward the objective of bringing the Chinese into your core market of Spain,” he said. “And as Barceló also has a domestic travel agency division, there is the additional financial incentive.”