Langham shrugs off glut worries amid expansion
Hotel chain says mainland's oversupply of 5-star rooms temporary, despite drop in occupancy
Langham Hospitality Group, owned by Hong Kong developer Great Eagle, has quickened its expansion as it takes on international rivals Marriott and Sheraton in the increasingly competitive mainland hotel market.
Worries about a room glut are mounting but chief executive Brett Butcher said the company, which aimed to have 50 mainland properties under its stewardship, could gain the upper hand over its Western competitors as it offered better food and services to Chinese customers.
Langham opened its five-star Eaton Luxe Xinqiao Shanghai in the city's Songjiang district last week and runs seven hotels across the mainland. The company's portfolio could more than double soon since another 10 properties are in the pipeline.
"We are a Chinese company and we understand Chinese culture better than others," Butcher said.
Butcher brushed aside concerns about an oversupply of five-star mainland hotel rooms, describing the present drop in occupancy rates as a short-term phenomenon.
According to real estate consultancy Jones Lang LaSalle, Shanghai is expected to have 56,000 rooms under management of international hotel brands by 2015, about 40 per cent more than the supply of 40,000 rooms last year.
The occupancy rate at the hotels is hovering below 60 per cent in Shanghai, compared to more than 70 per cent in 2010 when Shanghai hosted the World Expo.
Butcher said competition was expected to be fiercer but it would not stop Langham from expanding quickly on the mainland. The group believed the growth in leisure travel by mainland residents would change the hotel business landscape soon.
Mainland tourists were the largest contributor to Langham's hotels in Hong Kong, accounting for 23 per cent of total guests.
He added that Langham would open more hotels in the mainland's "interior", where the company expected growth in demand would be faster than that in coastal cities.
In addition to managing properties on the mainland, Langham is also looking to invest in and own hotels in the fast-growing market. In 2010, it paid US$73 million for a one-third stake of the Langham, Xintiandi, Shanghai.