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China turns to be a hotspot for hotels' expansion

By Qian Yanfeng (China Daily)
Updated: 2008-11-24 15:27

As the travel and hotel industries worldwide face the squeeze from the global economic recession, China has turned out to be a hotspot for hotel owners and management companies to seek continued growth and expansion.

In Shanghai alone, adding to the ever-changing city's skyline, will be a number of luxury hotels in the coming two years.

Six years after it made its first footprint in Shanghai, the world's leading luxury hotel Four Seasons Hotels and Resorts said it would start a second chain in the city's Pudong district by the end of 2009. The hotel company is ready to embark on a rapid path of expansion there, encouraged by the country's phenomenal pace of development that seems undaunted even by the current worldwide financial crisis.

Four Seasons has also announced new openings in Hangzhou and Beijing by the end of 2009, and Guangzhou and Sanya in Hainan province in 2010. It currently operates three hotels in China including Shanghai, Hong Kong and Macao.

For Isadore Sharp, chairman, founder and CEO of the Canada-based luxury hotel chain, this is just the beginning.

He says China is of strategic importance to the company's global expansion given the sheer size of the population and the country's potential to vie with North America as an economic super power.

"We grow with the market," says the 76-year-old hotelier, who obviously revels in the outlook of his hotel business in China. "China is a vibrant country. For the hotel and travel industry, they are going to benefit from what's happening in countries like China, India, and Russia. The dynamics and demographics in this part of the world is going to overwhelm what the future will be in our industry."

He adds that in the future Four Seasons may probably have as many hotels in China as it has in North America, where it now manages a conglomerate of nearly 40 medium-sized hotels of "exceptional quality".

"If you look at the size of the country in a number of cities, we are just beginning," he says.

Obviously Sharp is not alone in thinking so. The world's largest private hotel company Global Hyatt Hotel also announced in September the opening of the first Park Hyatt in Shanghai, together with two other new hotels in Beijing and Guangzhou in the same year. Mark S Hoplamazian, president and CEO of the private hotel company, says given the significant growth in the Chinese business community and its need to travel around the country, there will be great demand for Hyatt's lodging.

Both hoteliers have reason to be optimistic. The last time Sharp was in China was when the first Four Seasons Hotel opened in Shanghai in 2002. Since then, the country has undergone "dramatic changes," which, according to Sharp, has given the company a foothold to grow and expand in the country.

"A good example of what China is capable of doing is the way it handled the Olympics," says Sharp. "China has set a standard that the only time when it is reached again is when it runs another Olympics. It is symbolic of many other things happening here. It has raised our sights. We also want to be the Olympic champion of the hotel industry," he chuckles.

Both hoteliers' belief in the prospect of the hotel industry worldwide, especially in China, is not dented by the current economic downturn. For them, the whole idea of economy going down is within its normal cycles, which will not affect the companies' long-term strategy and undermine what the future holds for the hotel business in general.

"The hotel industry worldwide is going through normal downturn in the economic cycles, but you are prepared, because it's natural business," Sharp notes. "The industry today is the largest industry worldwide, growing in percentage terms probably greater than any other industry. You have to understand that we build a hotel to last 80 to 100 years, so it doesn't matter whether we build it during a downturn. It's a long-term commitment."

What hotels like Four Seasons could do, he says, is to organize their business plans to be able to go through the (leaner) times and make sure the crisis does not affect the companies, so that they would become strong enough to withstand whatever happens in the economy and be prepared to deal with the next good cycle.

Hoplamazian, too, agrees that the economic growth in China, especially in Shanghai, is going to be strong over the long term. The company wants to stay focused on making sure that the hotels are built for the long term. He says.

Zhao Huanyan, consultant at the Shanghai-based SAO Hotel Solution Consulting Ltd, says that it is not surprising for major international hotel giants to look to China for growth opportunities. According to his observation, ten of the 12 major multinational hotel owners and management companies have either announced new openings or signed new contracts in China during the two months after the Olympics.

Jumeirah, the Dubai-based luxury hotel group and operator of the world famous Burj Al Arab, will reportedly open its first hotel in Shanghai early next year, and hopes to eventually open 10 in the mainland, though it did not provide a timeframe for that expansion.

Even budget hotels in China are receiving a boost from the current economic uncertainties. The Wall Street Journal reported earlier last month that Actis, a private-equity investor in emerging markets, recently pumped $65 million into the 7 Days Inn Group, a Guangzhou-based budget-hotel operator. The investor had reportedly expressed confidence in China's budget hotel industry whether in good times or bad.

"If we look at the potential of the tourism and hotel industries in the Asia-Pacific region, especially in China during the current global economic downturn, China will continue to offer growth opportunities and confidence for hotel runners," Zhao says.