China: The Hot New Frontier for Hotels

Hotel companies based in the United States and the United Kingdom are racing to plant their flags in China and Hong Kong. Why? With one billion citizens, a dynamic economy that drove up gross national product by 3 percent last year, and with the 2008 Olympics coming to Beijing, China is poised to become the economic engine of Asia, analysts predict.
   “Today, China is viewed as a boundless, no-limit, to-the-ceiling place for Western investment,” said Robert Mandelbaum, director of research information for Atlanta-based PKF Consulting. China’s flexible currency laws, plethora of affluent travelers and impending government reforms to ease travel restrictions make this vast country ripe for investment, he added.
   “It is a burgeoning market, not just for U.S. executives going there to do business, but also for Chinese executives,” said Mandelbaum.
This fall, Tom Higgins, CEO of Phoenix-based Best Western International, announced plans for 100 hotels in China by 2007; Best Western competes with Holiday Inn, which projects growing its brand in China by 800 percent by year-end 2006.

Among full-service brands, Hilton, Hyatt, InterContinental and Marriott will compete with established Asian chains like Nikko Hotels International and Shangri-La Hotels and Resorts. Areas eyed for hotel expansion are Beijing, Guangzhou, Hong Kong and Shanghai.
   “Western companies are expanding into these cities, and we are following that  business,” said Jack Kerr, senior vice president of development for Hyatt Hotels Corp., the domestic arm of Chicago-based Hyatt.
   Concerns of another SARS outbreak or political upheaval that could prevent U.S.-based travel to China are heavily outweighed by China’s economic potential, according to Singapore-based Gunnar Brandberg, vice president of business development for Middle East & Asia Pacific, Hilton International.
   “Long-term forecasts indicate the Chinese market will expand to become one of the world’s largest travel markets in terms of both inbound and outbound,” Brandberg said. “While SARS and other issues are a concern, we are in this business for the long term.”
   Paul Cerula, senior vice president of international sales for Washington, D.C.-based Marriott International, said the chain was “bullish” on China. “The World Tourism Organization predicts China will be the number-one generator and receiver of international tourism by 2020,” he added, “and we see no reason to doubt that prediction.”