Foreigners No Longer Seen As Primary Market The Four Seasons Hotel Pudong in Shanghai. (Condé Nast Traveler) In a move that reflects the fact that luxury hotel expansion in China is still ongoing and rapid, international Sheraton and St. Regis owner Starwood Hotels recently announced that it will be opening 20 new hotels in China this year with a total of "100 in the pipeline." The company is not alone in its rush to expand on the mainland, but is rather one of many international hotel chains hoping to bank on a growing number of affluent Chinese travelers making their way around the mainland for both business and leisure. "Starwood's hotels in China are no longer just outposts for Western travelers, and today 50 percent of guests at hotels here are Chinese," read the company press release. These statistics represent a broad shift toward targeting wealthy Chinese customers that has been occurring for global luxury hotel chains across the mainland. Domestic travel in China is expected to rise by 25 percent by 2015, according to Samad Laaroussi, chair of luxury hospitality at Ecole Hôtelière de Lausanne in last week's World Luxury Index Hotels study by Digital Luxury Group in partnership with Ecole Hôtelière de Lausanne and Luxury Society. Much of this increase will be driven by Chinese travelers. Certain luxury hotels have seen a dramatic reversal from foreign to Chinese guests, such as Banyan Tree Lijiang, which had a customer base that was 80 to 90 percent foreign when it opened in 2006, but more than 70 percent Chinese since 2008. Starwood is one of the largest high-end hotel operators in China and has expressed plans to eventually "double its luxury footprint" in the country. Other companies are not far behind with similar ideas, as growth rate percentages are in the double digits for the top 10 fastest growing luxury hotels in China (chart below). Four Seasons, which recently saw three China locations named on Condé Nast Traveler's "Best New Hotels of 2013," plans to eventually have as many hotels in China as in the United States. Meanwhile, Rosewood, which has been owned for two years by New World China Land, part of Hong Kong-based powerhouse Chow Tai Fook, will open its first mainland hotel this summer. The top 10 fastest growing luxury hotels in China with growth rate percentages, from the World Luxury Index Hotels Report. (Digital Luxury Group in partnership with Ecole Hôtelière de Lausanne and Luxury Society) The rising number of Chinese customers has also been pushing luxury accommodations beyond their concentrations in first-tier cities. To name just a few of the biggest projects in development in the coming years in the second tier and beyond, Tianjin will see hotels by Ritz-Carlton, Meliá, and the Four Seasons, Taiyuan is in the works for Fairmont and Kempinski, and the Four Seasons will be opening this year in Shenzhen. Mandarin Oriental has plans for Chengdu, as does Ritz-Carlton. As leisure becomes a growing travel purpose for China's affluent, resort construction is also on the rise, and not just in Hainan, the "Hawaii of China." For example, as Yunnan province becomes a popular destination for Chinese vacationers, it is witnessing a plethora of new resort openings. Thailand's Anatara opened a resort there in February, and Banyan Tree, Aman, and St. Regis have upcoming openings slated for Lijiang. In another move most likely aimed specifically at Chinese tourists, Shangri-La has announced plans to open a luxury hotel in Confucius' birthplace of Qufu this summer, with interior design based on key principles of Confucian philosophy. The Four Seasons Hotel in Guangzhou. (Condé Nast Traveler) The rapid rate of new hotel construction may be outstripping demand in the short term with fears that "ghost hotels" may not receive the eventual payoff they expect, but companies are still eager to enter the market early in the hope that brand recognition will pave the way for later success. Starwood's Sheraton, which was the first international hotel in the People's Republic in 1985, is already reaping the benefits of early entry. China is Starwood's second largest and fastest growing market, and Sheraton is the country's most sought-after hotel brand. One main short-term benefit for hotels entering the increasingly crowded China market is the brand recognition it gives them with wealthy Chinese tourists traveling abroad. Both Starwood and Four Seasons have explicitly stated that new construction in China is aimed in part at accomplishing this goal. "A challenge for international hotel chains is to develop loyalty with Chinese travelers, who when traveling abroad for leisure are expected to stay with their usual preferred hotel chain," said Florent Bondoux, head of strategy and intelligence at Digital Luxury Group and author of the World Luxury Index report. "However, while Chinese taste for luxury is maturing and becoming increasingly sophisticated (as observed in other luxury categories); we can expect more local unique hotel brands to get the favor from wealthy Chinese travelers," he said.
