IHG makes majestic move
in China InterContinental
Hotels
Group has launched its second flag in less than a month with Hualuxe Hotels & Resorts, an upscale brand developed in China.
The company hopes to open first hotel under the Hualuxe name by early 2014 and said that it was in contract negotiations on over 20 projects. The brand is expected to eventually expand outside China. Hualuxe translates from Hua,
which means majestic China and luxe, representing luxury. Hualuxe will follow IHG’s managed operating model, similar to its other IHG brands currently operating in China and the group said that, although it did not anticipate investing its own capital to build hotels, the brand would be supported with development and marketing funds in the first few years, although no figures were given. The group is thought to be
looking at revpar for the brand between that of Crowne Plaza and InterContinental, with more that 50% of revenue coming from food and beverage. The company said that the
brand would launch initially in primary, secondary and tertiary cities and resort locations, with, it said, the opportunity for the brand to be in over 100 cities in China in the next 15 to 20 years. Hualuxe was created by the company’s local team in China and is intended to appeal to domestic travellers, who, the group anticipates, will travel increasingly outside the country.
With IHG forecasting outbound
trips from China growing from 10 million to more than 100 million in the next 10 to 15 years, it is expected that the brand will also be launched outside China after gaining sufficient recognition with travellers, although Richard Solomons, IHG’s CEO, did not give a timeline for overseas growth. Keith Barr, IHG’s CEO, Greater
China, told China Daily: “We’ve already talked to international companies in major markets such as the Maldives and we were impressed with their interest. Who are the biggest inbound tourists to the Maldives? The Chinese. We’re looking at spots with lots of travellers from China such as Bangkok and Tokyo.” IHG currently has more than
160 hotels across 60 cities in China, with the group planning to have as many hotels in China by 2025 as it does in the US. IHG earned USD1.9bn in hotel revenue from China last year, up from USD1bn in 2009. Solomons said: “It’s an incremental piece to our existing business. We’ve got five brands in China that are growing very fast and they appeal to a certain group of customers, but there’s another group that are looking for something different.” He added: “The Chinese
traveller wants the status of a world-class luxury hotel group combined with a feeling of pride in China and respect for Chinese tradition. We are filling the gap and providing them with an environment to conduct business and socialise in a way that is tailored specifically for them.” The primary distinction
between the new brand and the group’s existing hotels will be the lack of a hotel bar. Solomons said: “You can still get alcohol,
but that’s not how the Chinese do business - there will be tea houses.” The hotels will feature additional food and beverage, including a late-night noodle bar. Guests will also benefit from what the company describes as a “VIP arrival, a unique Club Lounge experience and specialty food and beverage ‘hosts’ throughout the hotel serve to underpin the importance of our guests and ensure the hospitality they receive and in return give to their business partners is flawless”, underlining IHG’s intention to focus on the business market. When asked if China was at
risk of over-supply of hotel rooms, Solomons said: “You’ve got a fast- growing market. The hotel market, historically,
grows in line with GDP. If you feel long term that there’s going to be GDP growth, as there has been in the past, this market will need hotel rooms.”
HA Perspective: This new brand looks a compelling proposition. While the devil is in executing on the detail, IHG has laid solid foundations. And its track record with previous brand launches, such as Indigo, should give owners a great deal of reassurance. There are at least a couple of
nagging issues, however. First is the question of whether we do need a hotel brand that is so clearly identified with a nationality. While most Western hotel brands are essentially American they have worked hard to shed their US bias in favour of a more international flavour. As part of this process, brands
are tweaked in respective markets to accommodate local domestic requirements. Examples might be the provision of bidets in southern Europe or
offering hot evening meals even at limited service hotels in countries like Spain. It clearly makes sense to
offer tea rooms in China if that is needed but could not the InterContinental brand do that? And how compelling is such a clearly Chinese brand outside of China? A cynical commentator might
suggest that IHG has created this brand to fill slots in cities where the InterContinental brand is already present. In fact, IHG has alluded to such motivation itself. Secondly, there is the issue of whether the addition of yet more brands undermines the arguments deployed by the global majors that scale is all. While of course the new brand has all of the muscle of IHG’s reservation and loyalty systems behind it, true brands are about building an identity and connection with consumers. Scale and reach makes this possible while building an ever expanding roster of brands dilutes the impact.
Hotel Analyst
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