As the hotel boom in Asia/Pacific comes to fruition, a spectrum of midprice and upper-tier options will open up for travel and meeting buyers. However, despite the bountiful supply—1,555 hotels with 366,679 rooms currently are under construction in 24 countries across the region, some due to open this year, according to lodging real estate research firm Lodging Econometrics—rate negotiations won't be any easier, if history repeats itself.
"The last three years have been extremely tough," said Berthold Trenkel, president of Asia/Pacific for Carlson Wagonlit Travel. "Last-room availability clauses were getting dropped by the hotels. They will not guarantee rates or last-room availability, and if they can drop these clauses, that shows you how strong they are."
Hotels in the region are well aware of the advantage they have, which in the past has caused problems for buyers. "As rooms gets tight, hotels will not honor their deals and start telling you rooms are not available," Trenkel said. "Global distribution system inventory will disappear and you will start managing rooms on a local basis, where you'll need to call directly to get rooms." Unfortunately, there isn't much travel managers can do to combat such tactics. "How can you prove to a hotel that they have rooms that they aren't giving to you?" Trenkel said.
Average room rates for both midprice and upper-tier hotels in the region are expected to increase 18 percent to 22 percent in 2008, according to American Express Business Travel's recent global forecast. Citing CWT data, Trenkel attributed rising rates to gross domestic product growth. "As GDP grows, activity goes up," he explained, noting that China in particular is poised to soon surpass the stronghold economies of the United States and Japan. "The growth of the economy grows business activity, and travel is a part of that."
This fact has not been lost on hoteliers. Best Western plans to open 200 hotels in Asia/Pacific by 2010, and in 2008 will debut new properties in Japan in Tokyo, Hirosaki and Matsumoto, as well as a new hotel in Thailand and a renovated property in Kuala Lumpur, both in Malaysia. "[Asia/Pacific] has been on our radar for a while and the forces driving it are the booming economy," said Best Western president and CEO David Kong, who, like many others, pointed to China and India as particular areas of interest for expansion.
Kong said Best Western is zeroing in on major gateway locations in India, like Mumbai, followed by up-and-coming cities like Bhubaneswar, in the province of Orissa. "I went there last June and there are three IT parks being built," Kong said. "All the major IT companies like Microsoft and Hewlett-Packard are going there." Best Western also is establishing a hotel school in India to further solidify its presence there.
Wyndham also is focused on expansion in India, while others have more widespread plans. For example, Carlson late last year partnered with Lotus Hotel Investment Fund on a $1 billion private equity fund to further develop its hotels across the Asia/Pacific, not just in such high-growth markets as China and India, but Thailand and Vietnam as well
(BTNonline, Oct. 10, 2007).China is a particular area of focus for many brands, including Marriott International and Hyatt Hotels & Resorts, as each plans to open properties in China through 2010. "China does seem to have the greatest amount of interest from investors, and this is reflected by the number of hotel companies with major development plans for the country," said Roger Pfund, general manager and vice president of Asia/Pacific operations for BCD Travel, "but I believe there will be a broad effort by major hotel companies to establish their brands throughout the region."
Hilton Hotels Corp., which already operates six hotels in China, will open one Doubletree in Beijing, another in Kunshan, a Conrad in Shanghai and a resort and spa in Chongqing.
InterContinental Hotels Group, which has 67 hotels open in China and plans to double that figure this year, in 2007 opened three InterContinental properties in China and in March will open the 438-room waterfront InterContinental Qingdao in Shandong. The 350-room InterContinental Beijing Beichen debuts in April, and the hotelier said the property would be the Beijing Olympic Centre's first luxury hotel.
In 2008, luxury Capella Hotels & Resorts will open its first venture—and sixth worldwide—in Singapore, featuring 72 extended stay suites.
The 2008 Olympic Games in Beijing are a driver of China's hotel boom, but not the only one, said Pfund. "China also will host the World Exposition in Shanghai and the Guangzhou Asian Sports Meeting in 2010," he noted, adding that the World Tourism Organization predicts China will be the number-one tourist destination by 2020.