Saturday, November 10, 2007

Global hoteliers are riding a building boom in Asia, and using plush new hotels as giant advertisements to lure newly rich Chinese and Indians

Global hoteliers are riding a building boom in Asia, and using plush new hotels as giant advertisements to lure newly rich Chinese and Indians to their US and European properties.

Operators such as InterContinental Hotels Group and Hilton Hotels Corp are growing fast in an Asian market worth US$115 billion a year, spurred on by a regional travel craze.

But they also hope to lodge their brands in local minds. That’s because despite a reputation for cramming into cheap package tours, Chinese tourists spend an average US$3,786 on trips to the United States and US$5,253 in Europe.

The number of Chinese travelling to the US has jumped 44 per cent in four years to 320,000 last year, and Indian visitors increased nearly 60 per cent to 406,000, according to the Pacific Asia Travel Association.

InterContinental’s acting Asia head, Anthony South, said the chance to capture the outbound market was a motive in a deal to buy a controlling stake in the hotel management unit of Japan’s All Nippon Airways Co (ANA) last year.

ANA later sold its 13 hotels, jointly branded with InterContinental, to US investment bank Morgan Stanley.

‘Through good times and bad, the Japanese go to all corners of the globe and are very well-heeled,’ Mr South said. ‘The same applies to China, where the outbound market is growing off a small base very rapidly. If they identify with our brand at home, it’s good for our business.’

InterContinental, which like most hotel firms has eschewed ownership to only operate hotels, aims to add 130 new properties to its 190 in Asia over three years. And at its Holiday Inns outside China, the firm is starting to stock hard pillows popular with the Chinese and installing water boilers for instant noodles.

Asia’s hotel market is far from a sure bet, with the 1997 economic crisis and an outbreak of the Sars respiratory disease in 2003 each causing a 20 per cent drop in visitor arrivals. But the travel industry has a knack for bouncing back quickly so hotels are taking long-term views, focusing on the economic growth rates of around 10 per cent in India and China.

‘As the wealth in both countries increases, the first thing people want to do is travel,’ said Gerald Lawless, chief executive of Jumeirah, a hotel firm owned by the ruler of Dubai. Jumeirah aims to operate 60 hotels by 2011, with three or four each in India and China.

The company now runs 11 luxury hotels, including the sail-shaped Burj al-Arab in Dubai and the Jumeirah Essex House in New York. ‘The outbound market is vital for us,’ Mr Lawless said. ‘There’s been a surge in Chinese visitors at the Burj.’

China’s US$16 billion hotel market, growing at 15 per cent a year, is the main focus in Asia for most operators and investors.

The number of domestic trips per year has doubled since 2001, and domestic tourism is expected to rise to 8 per cent of gross domestic product within a decade, from 5.4 per cent in 2002.

And with the 2008 Olympic Games expected to put China on the world travel map, Hilton has clinched a deal to manage around 20 new hotels being built by Deutsche Bank’s property arm RREEF and private equity firm H&Q Asia Pacific.

Hilton, now with six hotels in China, has tied its loyalty programme to Air China and China Eastern Airlines to hook Chinese on its brand when they travel abroad.

India’s hotel market is even more lucrative, with US$300 room rates common because of a massive shortage. The country has only 110,000 hotel rooms, with internationally branded rooms making up less than 40,000 of the total - less than half on offer in tiny Singapore.

But the inflated prices could hurt the industry. Average room rates have risen 30 per cent in the last year. ‘Inflated room rates will have a severe negative effect on potential demand, especially in leisure destinations,’ said Manav Thadani, managing director of consultants HVS International.

Investors are keen to build more - Citigroup, for example, is building a luxury hotel in Bangalore with developer Nitesh Estates.

Around 100,000 rooms are forecast to enter the market over the next five years, but India’s creaking infrastructure could stall the plans. ‘Unless the airport situation is addressed and new ones opened, it’s going to be a barrier,’ said InterContinental’s Mr South. ‘Hotel development will be in a stop-start manner.’ - Reuters

Source : Business Times - 7 Nov 2007

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