Hilton targets Chinese market as its top priority
THAILAND – The international five-star luxury hotel chain Hilton Hotels & Resorts plans to open about 100 new outlets in China in the next five years to extend its business into the nation’s second- and third-tier cities.
The company’s Chief Executive Officer Dave Horton told China Daily that Hilton has made the Chinese market its top priority globally.
Hilton Hotels & Resorts currently has eight hotels and resorts in China, with another 38 properties under construction and more than 60 properties in various stages of development across the country.
Its parent company Hilton Worldwide operates a total of 17 hotels and resorts under four brands in China: Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts, Hilton Hotels & Resorts and DoubleTree by Hilton.
According to the China Travel and Hotel Association, China had about 16,000 hotels as of 2009, of which four- and five-star hotels accounted for 17.5 percent, an increase from 7.7 percent in 1999.
However, the financial crisis hit hotels in first-tier cities such as Beijing and Shanghai harder than those in second- and third-tier cities. In the first half of 2009, Shanghai’s five-star hotels had an occupancy rate of only about 10 percent, according to the China National Tourism Administration.
“China is our No 1 growth market in the world,” said Horton. He said the hotels that the company plans to open are located mostly in second- and third-tier cities, such as Nanjing, Jiangsu province, and Hangzhou, a city in Zhejiang province that thrives on tourism.
“We have to be the first major hotel to establish a presence in those cities. That will make Hilton the first name that pops up in Chinese residents’ mind when they want to stay at a good hotel,” Horton said.
He said that while there are some concerns about a potential real estate bubble, the company is still very bullish about the market’s potential. “I don’t think that the market is saturated. Taking into account the population and growth of those cities, we don’t see the market as being overbuilt,” Horton said.
He explained that in the US, Hilton would have 45 hotels for a city with a population of 5 million. In China, it aims to have more than 20 hotels in some second- and third-tier cities, which have multimillion populations.
The overseas travel market is another target for Hilton. In a report released on April 12 about China’s overseas traveling, the National Tourism Administration said that the year-on-year growth rate will reach 13 percent by the end of this year and the industry size will hit $55 billion.
Hilton is optimistic about Chinese outbound tourism, so the hotel’s strategy is to first let Chinese people recognize its brand in the domestic market.
Horton hopes that when Chinese people begin traveling elsewhere in larger numbers, “they will stay with Hilton”. He said that this strategy has already achieved success in other countries and “being the first in a new market is very important”.
Other international hotel groups, such as InterContinental Hotels Group and Shangri-La International Hotel Management Ltd, all have plans to increase their presence in the Chinese market this year. To compete with rivals, Horton said that his company will maintain an accelerated expansion pace.
Hilton’s business plan this year will focus on adding luxury spa centers. The company held a two-week global general manager meeting in Bangkok to promote this project.
According to the company, all hotels under construction in China will be a part of their spa program, which they call “eforea”. Their first hotel in China to launch this program is the DoubleTree by Hilton hotel in Hainan province.
Although 90 percent of the hotel’s spa service is identical to the company’s global outlets, the other 10 percent is customized for the local markets, Horton said. For the Chinese market, the company will include an acupuncture service, which will not be available in other markets.