Wyndham sees a jump in same year signings and openings in China – one
hotel was even rebranded in less than a week of signing. Speed to market is one
big change in doing business on the mainland.
Around 40% of Wyndham Hotels & Resorts’ contracts in China
last year were same year signings and openings, compared with 20% to 25% in
2019. And it takes only three to four months on average to complete a deal
after the LOI is signed, unlike five to eight months.
If there's one big change in doing business in China, it's speed
to market, said Joon Aun Ooi, Wyndham Hotels & Resorts president Asia Pacific.
In fact, the chain recently reflagged a hotel managed by another brand to the
Wyndham Shanghai Nanxiang in just six days from its signing on March 31.
Speed and flexibility have become more essential during and post-COVID,
Ooi said. Having suffered financial losses, owners are looking for alternative
options and are turning to franchises, which Ooi said allows them to control
operating expenses and invest in critical areas to deliver a higher ROI.
That may be a self-serving statement as Wyndham is a franchise
king. But a 10% net room growth in Greater China last year, during which the
chain opened 116 hotels, does reflect a strong interest among owners in the
business model.
Wyndham has always been one of the biggest international players
in Greater China with more than 1,500 operating hotels at the end of 2022. It
dwarfs Marriott International, which hopes to cross 500 operating hotels in
Greater China this year by adding another 47 openings, albeit Marriott's model
is more management than franchising.
Joon Aun Ooi, Wyndham Hotels & Resorts president Asia Pacific
In the first quarter, Ooi said Wyndham already opened 15 hotels
and signed 27 deals. He expects the chain to surpass 1,600 opened hotels in
Greater China this year, thanks to improving market conditions.
Move faster, wider
Ooi shared that Wyndham has simplified internal SOPs so that deals
could be approved soonest. For example, irregular deals are set aside as “manage
by exceptions,” while standard ones go through the sieve. The regional
approving committee must respond to a deal within two to three working days,
while the process has also been streamlined with the global approval committee.
Additionally, the chain has placed half its development team in
various locations outside Shanghai, in other key cities such as Kunming and
Xian, so that they could get to the market faster and connect with owners more
effectively.
Conversions are a bright spot while new hotel constructions are
hobbled by persistent interest rate hikes and geopolitical tensions.
“Cost of debt has increased significantly, further compounding the
challenges of the last few years, which include higher construction costs,
materials and labor. This results in longer build times,” Ooi said.
Ooi said most projects that started during the pandemic didn't
stop but continued at a slower pace. “Those that hadn't started were delayed.
But now we are seeing the pace picking up, thanks partly to better valuations
due to a greatly improved trading environment,” he added. “Hotels are now back
as a viable inflation hedge, with the ability to adjust room rates dynamically
to accommodate higher demand amid higher operating costs.”
Shrinking labor pool
And like everywhere else in the world, the labor crunch is worse
than ever, which may seem surprising given China's huge population. The reasons
are the same – people have found other jobs and many are reluctant to return to
an industry that was crippled by the world's greatest lockdown.
At the hotel level, the labor shortage, especially at entry
levels, is “dramatic,” Ooi said. Most hotels are now performing better than
pre-COVID days and hotels, especially those in markets with a lot of new
openings, are feeling the squeeze.
This year's Labor Day holiday from April 29-May 3 – the first in
post-COVID – saw 274 million domestic trips, representing 119% of trips made in
the same period in 2019, according to China's tourism ministry data. Domestic
tourism revenue, $21 billion (148 billion yuan), is slightly higher than in
2019.
Hotels are now back as a viable inflation hedge, with the ability to adjust room rates dynamically to accommodate higher demand amid higher operating costs.
Joon Aun Ooi
China's population is also shrinking, with India making headlines
recently as having overtaken the mainland as the world's most populous country
with about 1.4 billion citizens. The Washington, D.C.-based Brookings
Institution said current projections are that China’s population is likely to
drop below 1 billion by 2080, and below 800 million by 2100.
Long term, hotels need to be aware of this change. One way is by
embracing digitization and AI now, which Ooi noted is accelerating in the
industry. Microtel by Wyndham Tianjin has robots that make an average of 30 to
50 trips a day to deliver water, towels and other amenities to guests, he said.
How to open in six days
But how does a chain convert a hotel in six days without losing
brand integrity?
There are advantages. The 315-room Wyndham Shanghai Nanxiang
opened in 2018 and has been well-maintained, requiring only minor renovations
or enhancements to transition it into a Wyndham, which is being worked on now,
Ooi said.
Another is know-how garnered from previous openings, and in having
in-market teams.
“Given the urgency on the owner's side, we quickly assembled a
task force comprising members from pre-opening, operations, commercial,
technical services and IT to work with the hotel team in lining up all the
processes and action steps,” said Ooi, who was the chain's vice president
openings & operations in Greater China from 2013 to 2018, based in Shanghai.
“It was a full collaboration, with daily meetings, frequent follow-ups and a
tight project management overview.”
Ooi added that once a brand has a strong pipeline in a fast-paced
market like Shanghai, a hotel can be signed and opened in quick succession.