Promising markets for the hotel industry

14 Jan 2015 by ReggieHo

As we have all gone back to our normal grind after saying goodbye to 2014 and ushering in 2015, we will continue to hear about ambitious plans major hotel groups around the world have for the coming year, especially in Asia. Here are five of the industry trends we have observed:

Diversification of the China market

Starwood Hotels & Resorts Worldwide has just announced that it has opened 74 new hotels in 2014, amounting to 15,000 rooms in 26 countries. Unsurprisingly, China continues to be the main driver of growth. This year, Starwood plans to open its 300th hotel in Asia Pacific, and the 150th in China. That means that half of its hotels in the region will be in the world's second largest economy, and all of its nine brands are represented there.

Having just opened The St Regis Chengdu (see story), Starwood is set to expand the luxury brand to Macau (see story). Its modern, health-conscious brand Westin has also been expanding rapidly in China, with last year's openings including Westin Qingdao (see story, and more about the city here). It will also add one member to its Luxury Collection, in Nanjing. Starwood’s eco brand, Element Hotels, will also enter China this year after the brand's first hotel outside of North America opens in Frankfurt (see story). And its classic Sheraton line will see a new member in Zhuhai this April (story).

Starwood was not the only hotel group keeping busy in the region last year. Hilton Worldwide has expanded its namesake brand to the Chinese cities of Qingdao (see story, and Inside China report about the city) and Haikou, and opened a Waldorf Astoria in Beijing (story). It has also added new members to its homey Doubletree brand, including in the northwestern Chinese province of Qinghai (see story).

Hilton has also brought to China the first Garden Inn property (story), which marks a significant change in the market. Given just a few years ago, there was little room for limited-service or mid-range brands in the country, as even luxury-brand properties were unable to ask for rates nearly as high as they would have in mature markets. But that space seems to have opened up.

Accor opened its second Grand Mecure in Beijing last year (see story), a magnificant heritage landmark Sofitel Legend People’s Grand Hotel Xian (story) and also signed a landmark partnership agreement with a local partner that will help expand its economy Ibis and Ibis Style brands as well as mid-market Mecure and Novotel portfolios (story).

Carlson Rezidor signed the first contract for its new Radisson Red brand (see story) in, of all the cities, Shenyang. It's not to say that this northern Chinese city is not important – it is a centre for heavy industries including aerospace, and software, automotive and electronics sectors are also developing – but Radisson Red a select service hotel in a smart package (the Carlson Rezidor folks call it a "lifestyle select" brand) seemingly more suitable for more developed cities such as Singapore, Hong Kong or even primary Chinese cities such as Shanghai and Beijing. In fact, Radisson Red in Shenyang will be part of a mixed-use complex that also includes a Radisson Blu, Carlson Rezidor's top full-service line, providing the sister property with support in food and beverage options and leisure facilities in a city that is hard to navigate for non-Chinese speakers.

A newcomer to the China scene is German company Steigenberger, with the contract for its seventh property already penned at the end of last year (story),  in addition to its first Intercity Hotel in the country (story), and a five-star Hotel Maximilian in Beijing (story) that is already in operation.

You can always tell how well a city is doing by hotel openings, and Tianjin is definitely one, brands such as Shangri-La (story), Hyatt Regency Tianjin East (story) and Pan Pacific Tianjin (story) all having recently found homes there.

Other hotel groups eyeing China include Dusit International, which has debutted its Dusit Thani and Dusit Devarana brands in the country last year (see stories here and here); Marriott International, with two new JW Marriott properties in Chongqing (story) and Shenzhen (which is only beginning to accept bookings this month, see story); Meliá Hotels (see story), with two properties signed in Zhengzhou; Jumeirah (see story), which is set to enter Guangzhou this year; Kempinski, with its largest property in China set to open in Beijing this month (story); and IHG, with an Intercontinental hotel in a rather surreal complex called New Century Global Center, which is an indoor city complete with an artificial beach.

Also worth checking out is Langham Xiamen (story), Hyatt Place Shenzhen Dongmen (story).

Road to India

India is a market comparable to China in terms of size, but somehow, it has not see as much action as China. One of the factors is a less welcoming environment for foreign investments. But things are changing as well. Accor opened an Ibis in the country's "Silicon Valley" of Bengaluru (see story), and Hilton Worldwide has also expanded the reach of its namesake brand there (see story) in addition to a Doubletree Suites property (story). It is also planning to introduce the Conrad brand to India (story) this year, in the city of Pune, which has a developed automotive sector. IT is also fast developing there. Meanwhile, a Courtyard by Marriott has opened in culturally rich Bilaspur, Chhattisgarh (story).

Alternative routes to high benchmark markets

Some of the region's more mature markets are very difficult to break into for hotel groups that have not already established footholds. Hong Kong is one of the most notable examples. Most of the prime locations have already been taken, and the costs of starting up are also high. Groups such as Carlson Rezidor, Kempinski and Fairmont have all wanted to open in the city but have simply not been able to identify a partner or site. So when the government put four-decade-old architecturally significant Murray Building in Central up for auction in 2011, it attracted a lot of interest. When I met with Steven Pan, chairman of FIH Regent Group, he told me that his company was eyeing the site for the re-entry of the Regent brand to Hong Kong (Regent Hong Kong became Intercontinental Hong Kong in 2001), but that has not materialised.

Eventually, Wheelock Holdings won the bid for HK$4.4 billion (US$567.4 million) at the end of 2013 and speculations arose that it may become a Marco Polo Hotels property, since the conglomerate owns the brand through its main subsidiary Wharf. And it just so happens, the group has just launched a new luxury brand called Niccolo (see story), further thickening the plot. But thus far, there has not been any confirmation and so it is still everyone's guess.

Some hotel groups, however, have found alternative routes, such as takeovers and partnerships with existing properties. Singaporean-owned, London-listed Millennium & Copthorne Hotels found its way through partnering with New World Development and taking over the management of Hotel Nikko Hong Kong, rebranding it as New World Millennium Hong Kong Hotel as of last July (see story). Once an institution, Hotel Nikko Hong Kong's shelf life expired as inbound traffic from Japan – its lifeline – gradually decreased over the decades.

French hospitality group Accor is in the process of getting its Pullman brand into Hong Kong through a franchise agreement with The Park Lane Hong Kong, which will see "a Pullman Hotel" added to its name sometime this month (see story). The management of the property will remain unchanged. It is in line with the group's aggressive plan to expand the upscale Pullman brand in the region (stories here and here).

Singapore is also a tough market to enter, and groups that have already established presence there seize every opportunity to expand and bring in new brands. Having debuted its Holiday Inn Express brand in the city in 2013, IHG opened its second one last year (see story). And it is a perfect market to expand limited service brands – there are already many luxury properties and the niche left to be filled is quality but simple accommodation for travellers who want to spare more of their set travel budgets on exploring the vibrant city. The Lion City is also ripe for more unconventional offerings, and its local hospitality players have long done well with properties such as Wanderlust Hotel and Klapsons (see review), but big players are putting up competition. IHG has recently opened the first Indigo in Singapore (story) and Accor launched a Sofitel So (see story) that has the name of fashion icon Karl Lagerfeld attached to it.

Hot new markets

The gradual opening up of Myanmar has, unsurprisingly, lured both airlines and hotels. Pan Pacific has long had a presence in the country with Parkroyal Yangon, and early last year, it opened Parkroyal Naypyidaw (see story). Also having opened in the Myanmar capital are Hilton Worldwide (story); Kempinski, in time for the Asean Summit at the end of last year (see story); and Accor, in the form of a boutique hotel called The Lake Garden, under the group's M Gallery (story).

Taiwan is not a new economy, but for hotels, it did go through some rather stagnant decades with not many new international brands opening, until after it entered the 2010s. After Starwood opened Le Meridien (see story and hotel check) and W Taipei (see story), iconic Japanese brand Okura followed (story), and last year, so did legendary Mandarin Oriental (story). Grand Hyatt Taipei, which had previously dominated Taipei, went through an extension renovation that has recently been completed (story).

Jakarta is also another market that is slowly waking up again. IHG has opened Holiday Inn (story) and Holiday Inn Express (story) there, and announced plans to open a long-stay property this year (story); Hilton Worldwide pledges a Waldorf Astoria by 2018 (story), and by March, travellers will get another luxury option, Raffles, to choose from (story). 

Japan: Giant reemerging

Once the economic powerhouse in Asia, this country is still slowly emerging out of a decades-long economic slowdown. The country has its own hotel brands and small individual operators, and it did not use to be a very welcoming market for foreign hospitality brands. But that may be changing. IHG, which is one of the companies that has long had a presence in the market, continues to expand with its local partner ANA (story), and Marriott has also opened two properties there in 2014 – a Ritz-Carlton in Kyoto (story) and a Marriott in Osaka (story). Hyatt has introduced its contemporary and rather unconventional brand to the Japanese capital of Tokyo (story), while Millennium and Copthorne opened its first property there (story). A second Best Western hotel has also opened in the city (story).

Reggie Ho



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