Accor, Hilton, InterContinental Expanding In Asia Region

With Asian destinations eager to rebuild their business travel base following the severe acute respiratory syndrome outbreak, three major global hotel companies—Accor, Hilton International and Intercontinental Hotels Group—this summer took the lead in announcing aggressive expansion plans in the region.

For travel managers, the message behind these post-SARS developments was twofold: Hotels are extremely eager for their business and, consequently, the opportunities to negotiate aggressive rates and cost-saving value-adds are plentiful.

Prior to the virus outbreak, the pace of Asian hotel investment was thriving. Jones Lang LaSalle, a consulting firm that tracks Asia hotel sales from its regional office in Singapore, recorded 21 major transactions worth $670 million across the region in 2002.

"Japan and Hong Kong were the hotspots for investment in terms of sales value," said Scott Hetherington, the firm's managing director for Asia. "Particularly in Japan, 2002 was an encouraging year for hotel transactions and debt acquisition. Likewise, 2002 saw investment activity in India, as hotels were sold as part of the government's privatization program. The majority of purchasers were domestic owner/operators and hotel investors."

The industry's challenge now is to recapture the pre-SARS momentum in bringing back business travelers, as well as investors.

In the sprawling China market, Paris-based Accor in August announced its most ambitious expansion since it entered China 20 years ago. Nine new hotels were announced, including five upper upscale Sofitels and two upscale Novotels set to be operational by the end of 2004, bringing the total portfolio to 31. Key among the Sofitels are a 370-room property in Shenyang and 325-room property in Chengdu in Sichuan Province.

Yet, Accor also is among the few Western hotel companies to enter China's economy hotel sector, in this case with its Ibis brand. A 154-room Ibis Tianjin, located 70 miles southeast of Beijing, opens next month. A second Ibis will follow a year later in Chengdu.

"We see growing signs of an emerging class of business travelers in China, including intra-Asian travelers, who will not be looking to stay in deluxe hotels, but who do expect international quality standards," said Michael Issenberg, Accor Asia Pacific managing director. "At present, there are no international brands operating in Asia that satisfy this market need, despite demand growing rapidly."

Issenberg acknowledged SARS' devastating effect, "but this doesn't diminish the fact that China offers the greatest potential for future growth. That covers inbound and outbound travel and domestic travel," he said. "It's actually an ideal time to build a substantial hotel network in China and will help create the hospitality infrastructure for the country's economic expansion."

IHG in July announced 24 new projects through the region, including properties at the upper upscale, upscale and midprice price points. The majority of the new projects are midprice Holiday Inns. A Holiday Inn Burswood, for example, is scheduled to be built in Perth, Australia, while in Manila an upscale Crowne Plaza is under construction. Both are due to open in 2004.

"Such countries as Thailand and Malaysia are already major transient business travel and conference venues, while Vietnam is fast gaining popularity as an investment destination," said Tony South, senior vice president for development and asset management for Asia Pacific. "Together with China, Australia and New Zealand, they enjoy both strong international and domestic corporate travel demand."

Meanwhile, in the still nascent Bangladesh market, IHG in August announced dual projects in the main business city of Dhaka. Both the 300-room Holiday Inn and 396-room InterContinental are part of the same multi-use development adjacent to the airport. Both are scheduled to open in 2005.

London-based Hilton International in June announced it was fast-tracking new properties in Sydney and Kuala Lumpur, Malaysia, that slowed during the health crisis. "Our mission is to have a presence in every destination in the region that customers want to be in, and neither SARS nor war has changed this," said Koos Klein, Hilton International president for Asia Pacific. "Granted, these are cautious times, but we're forging ahead with developments to position the company for recovery." Both the 580-room Sydney and 500-room Kuala Lumpur hotels are scheduled for completion in late 2004.

Unlike Accor, IHG and Hilton, Shangri-La Hotels & Resorts is headquartered in Asia and this summer announced expansion plans of its own. A 580-room Traders Hotel is scheduled to open in Kuala Lumpur, contiguous to the city's convention center, in mid-2005, six months after the convention center. Traders is Hong Kong-based Shangri-La's upscale brand, below its deluxe Shangri-La brand. According to Giovanni Angelini, CEO and managing director, the project is especially significant because it is the company's second hotel in Kuala Lumpur and eighth in Malaysia. "It helps reinforce the position we're trying to create for the company as the leading hotel operator in the market," he said.