High Real Estate Prices, Low Occupancy Rates Force Changes#
China's luxury hotel-building binge, which only gained strength in the run-up to major events like the Beijing Olympics and Shanghai World Expo, has been good for domestic tourists and business travelers, but has made for a tough and crowded market for major hoteliers. With established players like Hilton looking to tap not only the business traveler or tourist market but also middle-class demand — in the form of lavish weddings or business events — what’s interesting to watch is how new entrants position themselves to stand apart from the crowd.
The impetus to make bold strategic adjustments has only become stronger as competition and expansion plans have become more aggressive. In November 2012, the Four Seasons opened its first Beijing location, while Meliá announced last month that it will operate two new hotels in Tianjin and Jinan. More recently, the Mandarin Oriental opened its third mainland China location in Guangzhou, and Rosewood laid out plans to open its first China location in Beijing this summer.
Facing a convergence of challenges, of which increased competition is only one, the Hilton Group is hyping an interesting tactical shift. Currently, the Hilton Group owns 35 hotels in mainland China, among them 18 Hilton-branded properties, 12 Double Tree hotels, four Conrad, and one Waldorf Astoria. This week, the hotel giant said that stiffening real estate control policies and lower consumption power are giving it reason to adopt its "smart luxury" concept -- rolled out worldwide last year -- in China.
While this could just be shrugged off as the usual PR wordplay, Hilton's ever-widening footprint in China, and the obvious economic and consumer changes afoot in the country make it clear that something has to be done to stay on top. How, exactly, Hilton will transplant its smart luxury idea into China remains to be seen. However, the Group's Conrad Seoul, opened last November, implemented the concept via high-tech integration and eco-friendliness.
“We will open nine new hotels in China this year and 10 more next year,”Bruce McKenzie, senior vice president of Hilton China toldNational Business Daily. “Hilton vigorously promotes its top luxury brands Conrad and Waldorf Astoria. The company has put China at the center of the company’s luxury hotel expansion plan. We believe that China will be the second largest market for Hilton just after the U.S.”
Hilton has opened a new hotel in Putian in Fujian province as a representative of Chinese third tier cities. It was reported by National Business Daily that Hilton will pay more attention to the second and third tier cities of China and introduce the company’s mid-range brand Hilton Garden Inn into the Chinese market next year. Besides the expanding of high-end luxury hotel brands, Hilton will also introduce Hampton Inn into China, a high-end economical hotel brand for business clientele.