(China Daily) China's express or midrange hotel brands are rapidly expanding across Asia, propelled by the impressive growth of Chinese outbound tourism.
In 2011, Jinjiang Inn, a major express hotel brand founded in 1996 in Shanghai, took a step toward overseas expansion through partnership with Oishi, a Philippines-based company best-known for its snack brands. This marked the first overseas Chinese express hotel to be built on a grand scale.
In January 2014, Jinjiang Inn granted a franchise to Maspion Group, an Indonesian company, which became the fourth offshore location of Jinjiang as it expanded its overseas markets. In November, the firm ventured into South Korea by opening a hotel in Myeong-dong, targeting Chinese tourists in the commercial area of Seoul.
With the rapid development of China's economy and rising wages, the number of outbound trips has also increased. China has emerged as the biggest outbound tourism market in the world.
Based on data from the National Tourism Administration, the total number of Chinese taking outbound trips reached 98.19 million in 2013, growing 18 percent year-on-year. Outbound tourists from China are projected to exceed 100 million this year.
Express hotel brands have been growing rapidly in the domestic market, but the thriving outbound tourism market has also stimulated overseas growth and prompted some firms to pursue brand licensing agreements with offshore partners.
"We are mainly focusing on mid-range hotels in our overseas expansion. And many investors in Southeast Asia are willing to introduce our brand into the local hotel market," says Wu Shenshen, deputy director of investment development at Jinjiang Inn.
"The method of cooperation with our Philippine and Indonesian partners is brand licensing," says Wu. "Our regional agent in Indonesia is now looking for a hotel location in Jakarta and Bali, which are hot destinations for many Chinese tourists."
Based on Jinjiang Inn's 15-year brand license agreement with Maspion, the Indonesian company will develop no fewer than five hotels in the first three years and at least 10 hotels in the first five years.
"Although the tourism market in Southeast Asia is very large, we are very cautious about our investment and select partners very carefully," says Wu. He explains that his firm does not directly invest in hotels in Southeast Asian countries.
"We just export our brand, dispatch our management teams to help our partners to open a new hotel and give them guidance about hotel management methods. Our partners pay royalties to us, and they are self-financing."
Jinjiang Inn has met some challenges in the process of its overseas expansion. Wu cites the Philippines as an example.
"We signed a cooperation agreement with our Philippine partners in 2011," he recounts. Owing to unstable political ties between China and the Southeast Asian country, his company's hotel project with its Philippine partner is moving very slowly, he says. However, two hotel projects in Manila are expected to be finished in 2015.
GreenTree Inn, a business hotel chain in China, has also expanded overseas. It opened its first branch in Dhaka, the capital of Bangladesh, in March 2014, and is now eyeing Southeast Asia.
"We have chosen partners in Vietnam and explored the hotel market situation in Indonesia. Apart from Southeast Asia, we set up a branch in South Korea," says Alex Xu, president of Green-Tree Inn.
"The rapid development of bilateral trade between China and Southeast Asia, especially the ever-increasing number of Chinese going on business or leisure travels to Southeast Asia, has brought about a large demand for accommodations."
He says that Chinese tourists prefer hotel brands that they are already familiar with, particularly homegrown ones. "This is an important reason why we are developing hotels here," says Xu, referring to offshore markets.
In Southeast Asia, the company concentrates on medium- and high-end hotels, targeting white-collar and business travelers.
"The total number of hotels we expect to open in this region could reach at least one-third of the number making up the domestic market," Xu says.
He says that there were about 2,000 hotel chains in more than 400 cities across China at the end of 2013, and that approximately $50 million is expected to be invested in hotels in Southeast Asia each year.
GreenTree's strategies for overseas expansion include acquisition, leasing and purchasing.
"Compared with local hotel brands in Southeast Asian countries, we have our own advantages, such as high popularity and high brand recognition among Chinese tourists," Xu says.
"However, due to language barriers and cultural and management differences, we need to make adjustments timely and adapt to the demands of the local market, while taking into account the requirements of international business travelers."
Xu is quite optimistic about the prospects for Chinese hotel brands in Southeast Asia, adding that these hotels will continue to increase in number alongside the growth of outbound Chinese tourists.
"We will also accelerate our overseas expansion," he says.
The shortage of hotels in some Southeast Asian countries and the strong purchasing power of Chinese tourists have brought about opportunities for mid-range Chinese hoteliers.
According to a 2014 report on China's hotel industry by Forward Business and Intelligence Co, an industry information service provider in China, tourist arrivals from the mainland to Myanmar reached 1.06 million in 2012, reflecting a significant rise over the previous years. They are expected to reach 3 million in 2014.
Tourists from Thailand, Japan and China comprise the top three travelers to Myanmar.
However, fewer than onethird of the hotels in Myanmar meet international standards, so the room for expansion into this market is huge for Chinese hoteliers, especially operators of high-end hotels, eyeing this country.
Moreover, based on the report, the number of foreign tourists in Singapore reached 15.6 million in 2013, rising 7 percent from 2012. The occupancy rate of high-end hotels in Singapore was pegged at 88 percent in 2013, while Chinese tourists have been shown to have the strongest purchasing power among other tourists, spending a total of S$2.98 billion ($2.3 billion) in 2013. Such spending presents a tremendous opportunity for Chinese express hotel operators eyeing a foreign market like the city-state.
According to Li Xinjian, a professor of tourism at Beijing International Studies University, China's express hotels play a key role in the international market. Express hotels, after years of development, have gained vast experience in market operations, capital utilization and brand management, and have become very competitive in the global market.
"The Southeast Asian countries were the earliest and (have emerged as) very attractive destinations for the Chinese outbound travelers," he says.
"The Chinese swarming into Southeast Asian countries, including Thailand, Indonesia, Singapore and Malaysia, create a great demand for hotels."
Chinese express hotels expanding into the region is a wise move, Li says, given their affordable prices and because some brands are already familiar to Chinese tourists based on their years of operation in the mainland. It also illustrates how outbound tourism helps promote overseas investment, he says.
But whether the considerable success of express hotels in the mainland will be replicated overseas is another question.
"It remains unsure whether those successful express hotels could continue to write their legendary stories abroad and adapt well to the foreign environment," Li says.
Source: By Fan Feifei and Zheng Xin (China Daily)
