Chinese brands follow travelers overseas
24 FEBRUARY 2014 7:15 AM
The rapid growth of Chinese outbound tourists is leading domestic hotel groups to embark on global expansion.
REPORT FROM CHINA—As global hotel chains move into China, their Chinese domestic counterparts are following the soaring number of outbound tourists by expanding beyond the country’s borders.
Chinese hotel groups such as China Lodging Group and Home Inns Group have seen huge domestic growth in recent years. The former’s Hanting Hotels brand, for example, which was founded by billionaire businessman Ji Qi in 2005, already boasts more than 1,000 properties in China. Ji has said in earlier reports he expects Hanting to be the world’s biggest hotel brand by 2020.
Similarly, Home Inns, which launched in 2002, has expanded quickly during the past decade and is now represented in 278 cities in China with more than 2,000 franchised hotels. This is just the beginning, according to Chief Strategy Officer May Wu.
“As outbound travel by Chinese travelers increases, we are looking for opportunities to capitalize on our brand awareness and customer base,” she said. “As international markets may be substantially different from Chinese markets, in laws and regulations, customs, cost structures and so on, we are currently still in the experimental stage of this initiative and thus do not have specific targets yet. However, Southeast Asia is what we are looking into now, due to its proximity to our home market and the volume of outbound travel.”
Home Inns is not the only Chinese hotel operator that believes a significant part of its future growth lies overseas. Indeed, representatives from both China Lodging Group and Jin Jiang International Hotels, which has a room inventory of more than 35,000 hotel rooms across 74 cities in China, have spoken of international expansion in recent years although both declined to comment for this report.
Follow the leader
For Patrick Zhu, VP of Jones Lang LaSalle’s Hotels and Hospitality Group in China, the huge growth of the Chinese outbound traveler means it’s only a matter of time before other hotel groups start to follow.
“The rapid growth of outbound tourists is definitely one of the major drivers of this trend,” he said. “In 2012, there were more than 80 million outbound tourists, a growth rate of 15% compared to 2011. This has shown a strong trend of outbound tourists from China’s mainland, and Chinese domestic brands, with their ability to meet the needs of this prosperous market, will definitely grasp this opportunity.”
Luxury Chinese hotel group Wanda Hotels and Resorts Company is ahead of the game, having already invested £700 million ($1.2 billion) in a hotel development in London, which, in three or four years’ time, will be the world’s first Chinese luxury hotel outside China’s mainland.
“Many Chinese travelers like to stay in London, so that’s where we’re going to start. But we also plan to develop hotels in another eight to 10 financial capitals around the world in the next three to five years,” said Ilja Poepper, VP of sales and marketing and IT at Wanda.
Wanda will not be limiting itself to catering to Chinese outbound tourists, although, for Poepper, this will be an important market for the growing group.
“Of course, Chinese business travelers and tourists will be one of our big markets, but we also want to cater to international travelers,” he said. “Indeed, to successfully build up an international hotel company, it is essential to be recognized by international travelers as well as Chinese travelers.”
Wu shared a similar sentiment. “While we believe our customer base and our brand awareness among Chinese consumers will give us a competitive advantage, we believe that any hotel can only be successful if it also gains a good base of local customers.”
One of the most important benefits of expanding internationally is that it will help Chinese domestic hotel brands strengthen their brand image among foreigners, Zhu said.
“Therefore, when foreigners choose a hotel in China, they won’t see the domestic hotel brands as strangers but something equally good and valuable as the famous international brands, but with an even better package,” he said.
This package could involve, as it does at Wanda, an authentic Asian feel, including an excellent Chinese restaurant and the group’s signature “Angel’s Welcome” tea experience.
“China, as a country with brilliant history and culture, will provide guests with a different but impressive experience,” Zhu said.
With international players such as Accor and Marriott International looking to increase their footprints in China with the aim of winning Chinese travelers’ loyalty, the country’s domestic brands must take steps to compete both internationally and on their home turf, Zhu said.
“As Chinese domestic hotel brands have competitive disadvantages compared to international brands in China, in relation to foreign tourists, Chinese brands need to strengthen their brand image among foreigners by building the image in source countries,” he said.