More leaders take the stage at HICAP Update; takeaway is opportunity
flush in Greater China.
HONG KONG – “Business is all about flow:
flow of people, flow of goods, flow of information and flow of cash.”
Those were the
opening remarks from JLL Hotels & Hospitality’s head of Greater China Tao
Zhou during “Views from the Boardroom, Round Two” earlier this week at the
HICAP Update at The Regent Hong Kong.
Tao said that comment described what
needs to be understood when it comes to reading the economic landscape. It also drew
into the conversation Gary Rosen, CEO of Greater China for Accor, who cited the
company’s Fairmont Peace Hotel on the Bund in Shangahi in terms of those
factors coalescing.
Rosen
said the hotel has been experiencing an ersatz “Taylor Swift Effect” due to the
over-the-top popularity of the Fan Hua TV series set in 1990s Shanghai and the
property’s inclusion, which has helped spur performance stats to outpace 2019
results as fans and visitors descend on the area, dining and staying at the
hotel.
“It [was] a huge factor in terms of
delivery, in terms of results and certainly the Fairmont Peace well surpassed
2019,” Rosen said.
Through a larger scope, the Accor
executive saw positivity in the overall Greater China market but stressed “it’s
not a one size fits all. Mainland China is an enormously diverse market… There
certainly are several cities that have exceeded 2019 [and] there are still some
that are coming up as a market… From an experiential standpoint, the market has
really redefined itself in the sense of what it can deliver in coming out of
the COVID period. The market has really surged.”
Tao agreed the Chinese hotel market in
general “has seen a good rebound, a good recovery for the business overall but
we see the international business is not that strong as the pre-COVID time.”
That said, Huilian Duan, managing director, Asia
for TUI BLUE Hotels & Resorts, expected her company will draw a fair share
of inbound travelers to the region in the near term. Germany-based TUI BLUE launched its business into the
Middle East, Africa and Asia Pacific two years ago and has 10 to 12 hotels set
to open this year, including its first hotel in China, slated to debut next
month in Shanghai.
The good news is corporate and group travel have rapidly picked up and the growth momentum is really encouraging to see in the market.
Yibing Mao
“[The] China market
is always good not only for the European market but also for the global source
market. TUI is the largest travel company in the whole world and we think we
have the responsibility to bring our international travelers to not only China
but Asia Pacific in general,” she said.
The company also will
be leveraging its TUI Cruises, a 50/50 JV it has with Royal Caribbean Group.
“We have 2,300 passengers we will bring over to experience the beauty of
Shanghai. TUI Cruises will say ‘hello’ to TUI Hotels… We do have ambitious
plans into this market,” Huilian said.
Alternative opportunities
Investors considering
the market also have a strong alternate to traditional hotels in the form of
serviced apartments. JLL’s Tao pointed out “all the hotels and apartments
really need very healthy returns on investments” but characterized apartments
as “more resilient longer term.”
Kevin Goh, CEO, The
Ascott Ltd. and Lodging at CapitaLand Investment, outlined how his company is
moving the needle within the serviced-apartment sector.
“We look at it from
an ecosystem perspective. There are various players in this ecosystem: There’s
the investor, who is the owner of the apartment; there’s us as the operator and
brand company, and then, of course, there are the customers,” Goh said. “From a
product perspective, we offer the customer a different product from what they
are used to; we have different configurations, we have different themes and
there’s a demand for such a product. The product also is very flexible… The
majority of our apartments are built with a hotel license in place, so we can
do both long and short stays.”
Goh said during times
when demand surges, the company leans “a lot more” to the short-stay segment,
which allows it to bring up rate—a positive for owners. As for investors, he
suggested the product “actually gives a lot more resilience to the earning
profiles of the business,” and characterized the overall operation as a
“win/win/win” for all involved: customers, investors and the operator/brand.
Marriott’s year in
China
According to Yibing
Mao, president, Greater China, Marriott International, her company had a winning
year in the market, with a record number of unit openings and new hotel
signings.
A big part of the growth in hotels is in conversion and there’s a significant amount of independent hotels in China today that are just great opportunities for conversion because it’s still [only] about 10% in China that are branded hotels; so, enormous growth opportunity.
Gary Rosen
“Across the board in
Greater China our RevPAR performance has exceeded 2019 levels,” as did ADR and
occupancy, said Yibing, citing pent-up demand from leisure travelers as a key
driver, which, in 2024, has begun to “normalize” in the China market.
“The good news is
corporate and group travel have rapidly picked up and the growth momentum is
really encouraging to see in the market,” she added.
“Greater China is one
of the most important markets for Marriott International,” second only to the
United States in terms of size, noted Yibing. “In terms of the RevPAR fee
contributions, it constitutes 10% of our global fees… In terms of the [hotel]
pipeline [it] represents about 20%. So, it’s just a huge market for us and with
great potential.”
Of Marriott’s
520-plus hotels in China, 80% are in the luxury and premium categories and 30%
of open hotels are held by SOE [state-owned enterprise] owners, according to
Yibing. However, she noted, in the wake of COVID, tertiary markets and
fourth-tier cities are becoming very popular as destinations with domestic
travelers. “So, I think that’s a huge opportunity,” she said, touting
select-service products as a “great choice” for both investors and customers.
Conversion opportunities
Accor’s Rosen
observed there’s also another avenue for investment opportunities. “A big part
of the growth in hotels is in conversion and there’s a significant amount of
independent hotels in China today that are just great opportunities for
conversion because it’s still [only] about 10% in China that are branded
hotels; so, enormous growth opportunity,” he said. “Out of the nearly 150
signings that we had last year, we had probably 35% of those in conversions.”
He cautioned, however,
that heading in this direction also called for hoteliers, developers and
investors to pay attention to ESG factors to ensure a more-sustainable industry
footprint in the country. “It just can’t be about signing the deal. It has to
take into consideration signing a responsible deal,” Rosen said.