With all the news about the robust growth of Asia, led by China, one might be tempted to think that money grows on trees in some of these countries. But for hoteliers working to tap Asia's economic potential, it requires a true understanding of the region's socio-economic dynamics. Simon Barlow, president, Asia Pacific of Carlson Rezidor Hotel Group, explained his company's strategy for the region to Business Traveller Asia-Pacific when he was in Hong Kong for HICAP.
"We are changing our basic business from being a franchise operator to being a manager of hotels. Pretty much all the hotels we have opened in the last two years have been managed hotels and not franchised," he said. The focus, Barlow went on, is to further develop in markets where the group already has established strengths, such as India and Thailand.
But, of course, no hotelier can avoid talking about China.
"Our strategy for China is at the moment cautious, and we are going to change that approach in the coming months and the next few years. We have today great representation in Shanghai and Beijing, with 34 hotels in total, between those in operation and in development," he said. One of the major shifts is more focus on emerging cities in China.
"As most hotel operators are seeing, the government of China is incentivising people to move away from the east coast’s traditional corridor of growth and inland into those secondary and tertiary cities where more hotels are required on the back of this huge investment on infrastructure. They have just announced another US$150 billion worth of infrastructure development over the next three years, and as more roads, rails, ports and airports get built, it enables people to move around the country more easily."
Carlson Rezidor has recently opened The Radisson Blu Plaza Chongqing Hotel in the major southwest Chinese hub (for more on Chongqing, read our Inside China story in the October issue), more properties are in the pipeline for Chengdu, Wuxi (where there is already a Radisson Blu Resort Wetland Park, pictured below) and Wuhan (see story here).
"It's no surprise that of the 430,000 hotel rooms STR are saying required in Asia, well over half are required in China because the domestic market has been growing and continues to grow in a much faster pace than international business coming into China."
Barlow pointed out that although 50 per cent of the 34 properties the company has in China are Radisson Blu, the future is in the mid-market sector. He said that there is no lack of upscale and luxury hotels in many Chinese cities, but other than Shanghai and Beijing, there is just not enough demand to fill all the rooms.
"When you are looking at the feasibly of a mid-market hotel, if five-star hotels are trading at US$80 to US$100, it means mid-market hotels are struggling to get to US$50 or US$60 with their room rates, which makes investment in those hotels difficult."
Improved infrastructure, he furthered, has fueled domestic travel and pushed up occupancy rates of the five-star hotels, allowing them to command higher rates. "It has been a slow progress, but it’s gathering pace now with all the money that the Chinese government is spending, that’s why we think timing is good now to get into mid-market."
In the next 12 months, Barlow reveals, China will see the introduction of Park Inn by Radisson, the group's "lively, contemporary and colourful mid-market brand". Park Inn is currently found in India, and The Philippines is expected see its first one in Davao next year (see story here). Barlow said that the products will be adjusted to suit local tastes and travel habits. Other than the colour palette of the decor, food offerings are also to reflect local tastes. "In India, we have slightly enlarged the room size - in Europe it's 19 sqm, but in India we have gone for 24 sqm because we believe that Indian families are a large part of the market." The same approach will also be used when the product is introduced to China.
Connectivity and technology are also two key elements in the group's product offerings in Asia. Currently, wifi is free in all Radisson Blu properties around the world, and all Park Inn in Asia-Pacific will do the same. "The ability to connect your device wirelessly in the room, to play music or to look at the photographs on the television is a key feature in our Park Inn products; using your mobile phone to gain access to the room, automated check-in as opposed to the conventional reception desk – these are technologies people expect today, and when we introduce the Park Inn brand into China, they will be introduced with that product," Barlow said.
Although both China and India are facing slowing economic growth, Barlow believes that long-term prospects in these two markets remain bright. India is grossly undersupplied, he pointed out, and his group is bullish about the market.
"We have a very strong market position in India, with 57 operating hotels, and 45 or so in the pipeline. Our ambition is to have more than 100 hotels in India by 2015, which will make us the largest international hotel operator in the market,” he said.
China, Barlow explained, is also seen by the hotel industry as the future exporter of travellers. “It should not be overlooked the reason why were are here, and all competitors as well; it is that in the next 20, 30 years, the brand recognition is going to pay tenfold, hundredfold dividends when the Chinese population really starts to travel the world in numbers."
The other two markets Carlson Rezidor is looking to invest more in, he furthered, are Indonesia and The Philippines, which is part of an important strategy of regional expansion.
"One thing we do struggle with is getting into places like Singapore and Hong Kong, because demand in those two cities is so strong, the barriers to entry to a new operator are very high," he explained. "That's why we have been concentrating in highly populous countries, because for us that's where we can get our growth and then over time, as market conditions start to come off a little, we will see opportunities to break into the Singapores, the Hong Kongs and the Tokyos of this world where today we are not represented," he explained.
Another imminent and major opening the group is expecting for next year is a 300-room Radisson Blu property in the heart of Sukhumvit in Bangkok, which Barlow said he believed would "put our Radisson Blu brand firmly on the map in Southeast Asia". Carlson Rezidor currently has four properties in Thailand.