Hotelier IHG doubles down on China, targets high-end hotel brands
InterContinental Hotels Group (IHG) is doubling down on the China market and plans to develop in the luxury segment to compete against other hospitality giants, according to its chief executive for the country.
“Luxury is a big focus area for us. It’s a US$60 billion segment that’s expected to grow by half over the next decade,” said Jolyon Bulley, CEO of IHG Greater China.
“We felt that in the upper-luxury segment we have a gap, therefore we are looking to either develop, or acquire brands. For now we feel we have levelled out. We have mainstream luxury in the InterContinental brand, boutique luxury in Kimpton and upper luxury in Regent. I see huge potential for these brands.”
He was speaking on the sidelines of an “owners workshop” in Chengdu on Tuesday, an event aimed at helping IHG connect with hotel owners .
Marriott Hotel, one of IHG’s biggest rivals, has a sprawling portfolio of luxury brands, including the Ritz-Carlton, St. Regis, JW Marriott, W Hotels and Sheraton. Another giant, Hilton Hotels & Resorts, boasts Waldorf Astoria, Conrad Hotels & Resorts and DoubleTree.
IHG has been aggressive in its pursuit of more premium, upscale brands globally. In March, it bought a 51 per cent stake in Taiwan-based luxury hotel chain Regent Hotels&Resorts for US$39 million.
Last week the company announced it will take over the operation of 13 luxury properties in the UK that were formerly owned by Starwood Capital. It bought boutique brand Kimpton in 2012.
IHG is opening new hotels in China at a clip, betting that demand will not wane.
In the first quarter alone it opened 11 hotels with 3,000 rooms, on top of 43 hotels that opened in 2017, an annual record for the group. Since 2011, when the company established Greater China as a standalone region for its business, IHG has opened 62,000 rooms there, and increased fee revenues by 70 per cent.
With a further 75,000 hotel rooms in the pipeline, China will soon account for a third of the group’s global portfolio.
Having signed management contracts with 33 hotels in the first quarter, IHG on Tuesday signed another ten hotels in Sichuan, Chongqing, Shaanxi, Yunnan, Gansu, Guizhou, areas of western China that boast distinctive natural beauty and cultural heritage.
“We are seeing China as our home market,” said Sun Jian, chief development officer of IHG China.
IHG has good reason to bet heavily on China. In the first quarter, revenue per available room(RevPAR), a key metric gauging hotel performance, increased 11 per cent in Greater China – 10 per cent in the mainland and 15 per cent in Hong Kong, well ahead of the 3.5 per cent increase worldwide.
RevPAR is still a long way behind that in advanced economies because of an oversupply of hotel rooms, according to Zhao Huanyan, a hospitality industry analyst with Huamei Consulting Group.
The risk, he said, is mainly borne by the Chinese owners, not hotel management firms, which operate on an asset-light contract model.
However, rapid expansion can damage a luxury hotel management company’s reputation by depressing room rates, said Zhao.
IHG also said it will open its first Kimpton hotel in Taipei later this year, and another in Sanya. It also plans to open hotels under its EVEN brand in Sanya, Shanghai, Jinan and Chongqing.