Major Hotel Chains Target China, India For Multibrand Development

Major hotel companies are focusing heavily on development in the Asia/Pacific region, particularly in India and China, although hotel programs in the region, many parts of which have limited availability and fast-rising rates, remain a challenge for corporate travel buyers.

Average daily rates increased from 2006 to 2007 by 13 percent to $128.60 during the month of July, according to the latest data available from Smith Travel Research and The Bench. The 30 percent increases in average daily rates in both Southeastern Asia and Central and South Asia are the highest regional increases in the world, as recorded by the firms.

Hotel revenues also are showing tremendous growth in the region. Revenue per available room in July was up 12.8 percent, according to Smith Travel Research and The Bench. RevPAR in Central and South Asia was up 32.7 percent, and RevPAR in Southeastern Asia was up 40.6 percent, higher than any other measured region, globally.

With many individual hotel companies posting similar results in the region, it comes as little surprise that the companies plan ambitious development. With locally owned hotels in some countries not listed in global distribution systems and often of unknown quality to foreign visitors, the presence of more brand names in those countries is a welcome sight to some U.S. travel buyers.

"There are certain standards those chains in general provide," said Kevin Iwamoto, former president of the National Business Travel Association. "When you go outside the norm, the onus shifts on you and you have to check everything out for yourself."

With the Olympic Games scheduled to hit Beijing next year, major hotel companies have scrambled to get new properties in China open in time.

Via its international subsidiary, Hilton Hotels Corp. operates six hotels in China, but will more than double that in the next few years. In late August, Hilton announced an agreement to manage a new Hilton in the Wangfujing district of Beijing, set to open next year, and also has scheduled to open in 2008 a Doubletree in Beijing, a Conrad in Shanghai and a Doubletree in Kunshan, as well as a resort and spa in Chongqing. Three other Hiltons are set to open in China by 2011. In June, a joint venture of one of Deutsche Bank's investment arms and private equity firm H&Q Asia Pacific agreed to create and manage more than 25 hotels in mainland China under Hilton's midprice Hilton Garden Inn brand.

China has been the biggest growth area for InterContinental Hotels Group's Asia/Pacific development, according to IHG spokesman Stephen Boggs. The company is the largest international hotel management company in Greater China—mainland China, Hong Kong, Taiwan and Macau—where it now has 67 hotels open. IHG plans to nearly double that by next year, and future growth is particularly focused on Crowne Plaza, which Boggs said is the fastest growing upscale hotel brand in the Asia/Pacific region, and Holiday Inn.

"There is tremendous international expansion and brand proliferation, especially in China," Boggs said. "IHG recently signed our 125th hotel in China, keeping us on track for our target of having 125 hotels open in the country by the end of 2008."

Marriott International now has 27 properties in China, according to company spokesman John Wolf, and by 2010 will have 15 more: six under the Marriott brand, three under the Renaissance brand, two under the JW Marriott brand and four under Marriott's midprice Courtyard brand. In addition, the company will open six of its luxury Ritz-Carlton properties in China by 2010, Wolf said.

Early this year, Hyatt Hotels & Resorts announced plans to open in China 15 new properties—three Park Hyatt hotels, three Grand Hyatt hotels and nine Hyatt Regency hotels. China already has more Hyatt properties than any other country outside of North America, according to the company.

Even U.S. economy brands are gaining traction in China. Wyndham Hotel Group on Aug. 27 announced that an Asia-focused investment management firm is investing $50 million in the master franchisor of the Super 8 brand in China, Tian Rui Hotel Corp. The franchisor already has opened 49 Super 8 properties in China and has agreements in place to develop 67 more. The new investment will allow it to begin operating and managing hotels in addition to franchising, according to Tian Rui CEO Mitchell Presnick.

Although it does not have the same established level of infrastructure as China, India also is a major growth area for U.S. hotel companies. Rates in the country continue to soar. In a midyear hotel update released in August, HRG U.K. reported that Mumbai's rates had increased 30 percent during the first six months of 2007, and that followed a 49 percent increase in rates during 2006.

Indian hotel rates can run as high as $600 per night, said Guga Saravanan, head of account management for Carlson Wagonlit Travel in India, during an educational session on the country at the Association for Corporate Travel Executives conference in Miami.

Distribution also is a challenge, with a majority of local hotels preferring direct reservations, leaving many travel buyers to seek their own solutions. "A large number of hotels are not hosted on the GDS," CWT's Saravanan said. "Corporations are building their own accommodations, most prevalently in Bangalore."

Locally established hotel brands already are embarking on expansion plans in India. The luxury Leela Palaces-Hotels-Resorts, for example, this year announced a three-year plan to double its capacity with a $300 million investment that will bring new hotels to Chennai, Delhi, Hyderabad, Pune, South Delhi and Udaipur.

Meanwhile, U.S. brands also plan to increase their presence in India. Marriott now has six hotels in India, but by the end of 2010 that portfolio will increase to 21, Wolf said. This will include three JW Marriott properties, one Renaissance hotel, one Ritz-Carlton, one Marriott, one Marriott Executive Apartments and eight Courtyard by Marriott properties, he said.

Best Western also has indicated plans to greatly expand its minimal presence in India. Earlier this year, Hilton also announced development brands for 10 hotels in India, a combination of the upscale Hilton brand, the midprice Hilton Garden Inn brand and the extended stay Homewood Suites brand.

Wyndham also is bringing its economy brands to India. The company announced Aug. 30 that Mumbai-based construction and engineering firm Gammon India would develop at least 38 Super 8 and Days Inn properties in the country by 2011.

Although China and India are receiving a majority of the focus, hotel companies also are developing other key business destinations in the Asia/Pacific region. IHG has aggressive growth plans for Japan and Vietnam, Boggs said, and Wolf said Marriott is bringing additional properties to Bangkok and Seoul.

Even with all those growth plans in place, however, travel managers said the region would continue to be a challenge as travel to the region increases. "I don't think it's going to be enough," buyer Iwamoto said. "It's going to help, but in the long term, I don't think it's adequate."

For that reason, travel managers often have to look outside of hotel offerings when planning Asia/Pacific travel. Iwamoto said corporate apartments are an effective alternative in high-volume cities.

"In Singapore, which still doesn't have enough hotels and doesn't have the land volume to support that many more hotels," he said, "you have to switch strategies."