The impact of a Chinese government clampdown on luxury travel spend isn't expected to impact IHG in the long term as it gears up to build up to 170 new hotels over an unspecified period of time.
InterContinental Hotels Group Plc, the world’s largest provider of hotel accommodation, plans to open “at least the same” number of hotels in China next year as 2013, even as growth in room revenue slows.
The hotel operator, which also runs the Holiday Inn and Crowne Plaza brands in Greater China, opened 17 hotels this year to the end of the third quarter in China, Hong Kong, Macau and Taiwan, which together are its second-largest market outside the U.S., said Chief Executive Officer Richard Solomons.
China’s hotel market slowed after the government banned officials from spending money reserved for meetings on banquets or luxury accommodation, as the Communist Party battles public discontent over wasting of government funds. The company, which first entered China in 1984, plans to hire staff and open more than 170 new hotels in the world’s second-largest economy that is heading for the weakest expansion since 1999.
“We are not cutting back at all in terms of what we are doing here,” Solomons said in an interview in Shanghai yesterday. “Government is not a huge piece of our business. As a good operator, if one piece of business is less, you go for another piece.”
The group, known as IHG, didn’t raise room charges much in China this year, Solomons said. Revenue per available room, a measure of occupancy and rates known as RevPAR, rose 0.7 percent in Greater China in the third quarter from a year earlier, slowing from 4 percent growth in the same period a year earlier, according to company filings.
The Denham, England-based company said yesterday that it plans to hire 110,000 staff in Greater China by 2015 to support its growth, adding to the 60,000 staff it already has. It has plans to open a further 179 hotels in China, according to the company, which didn’t specify over what period.
“We are bullish about China,” said Solomons, traveling on a trade mission to the country with U.K. Prime Minister David Cameron. “Our industry has always been cyclical. You shouldn’t worry about it. In the long term it’s a very attractive market.”
The company’s first hotel under new brand Hualuxe will open at the end of next year and it has signed 21 deals with local Chinese developers for these hotels, Solomons said, declining to say in which city the first hotel would be located.
Editors: Iain McDonald and Tomoko Yamazaki.
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Photo credit: Laterns hung at the Crowne Plaza Hotel located in Sanya, China. Toine Rooijmans / Flickr